Why is Ujjivan SFB looking to merge with Ujjivan Financial Services? What is the synergy in such a merger?

According to a statement put out by Ujjivan Small Finance Bank, it will shortly initiate the next steps in the process to amalgamate its holding company, Ujjivan Financial Services with the bank. It may be recalled that recently the RBI had allowed SFBs to amalgamate the holding company on completion of 5 years of business.

The logic is that holding companies are subjected to holding company discount. Hence, this proposed amalgamation will be instrumental in improving the valuations of the group overall. This proposed amalgamation will be subject to the approval of the RBI, which will be contingent on regulatory and supervisory merit. The other major SFB, Equitas SFB is also looking to merge Equitas Holdings into itself, along similar lines.