Ujjivan Financial Services is a micro-finance service company. The company got listed recently and shown a stellar performance in stock prices. Ujjivan started trading on exchanges from 10th May onward. Stock opened at Rs.231.90. Since then stock is in total uptrend.
We agree that company has shown incredible growth in past years and not only the customers but employees are are also happy. A fairy tale story.
The real question is whether this company is really worth while for showing such % increase in stock price since IPO. Or whether Investment Banker’s Financial Projections done while doing the Red Herring Prospectus were wrong.
We have not done our deep analysis on Ujjivan simply because we are not interested in something which had such wild run in such short period. Any small correction will simply trigger the stop loss.
The purchase price of the stock is 378 which is 62.31% more than the IPO price. One cannot blindly invest in the company just because some aspects of this company are showing unimaginable response.
Some of the point which indicates that purchasing Ujjivan IPO is not a good decision at decided IPO price, are as follow:
As said, the company is making a world-wide recognition network. Each media person is crying out loud about the soundness of business. It means that the investors from all over the world were willing to buy the IPO and wants to get them at earliest. Of Course, Regardless of the market price. This will also results in attracting lots of competition and a risk for present investors by investing at 378.
The good portfolio has invited restriction from RBI on FII (Foreign Institutional Investors). It means that the foreign investors will not be able to invest as the limit of aggregate foreign shareholding has reached. Better Hurry otherwise other players will take the shares and we’ll left empty handed. Too much hastiness among foreign players.
As RBI has put a stop to FII, a wave has emerged in the market of Ujjivan. 5% of panic has rose from this wave, i.e, Decrease in price from 378 to 372. This can lead to different reason for decline in share in near future.
As the foreign investment has cross the provided limit, Ujjivan will not get green light from RBI to increase this limit. The foreign Holding limit will be 49% only. This has shown a tremendous faith loss for investors, which makes it risky to invest at current IPO price of 372.
Micro-Finance crisis when arises, becomes a destructible weapon of the company’s economy. In 2010, a micro finance crisis was erupted which leads to closing down of small micro- lending companies and also had affect on companies like Ujjivan.
Profit Booking technique used by investors has drag this company by more than 10 %. Even the intraday has shown a decrease in the value of shares of Ujjivan.
Thus this are the various reason which does not make sense to invest @378 IPO price of Ujjivan Financial services. Though the company is looking like diamond right now, but in long term it may get affected by various small reason which will give rise to another making it an ordinary stone.
So, invest properly by focusing on the positive and negative points, as to prevent loss in future. Also, do thorough analysis. Know that positive reports does not always means positive facts. It is an indicator that, where there is positiveness, there is a scope of negativeness too.