UJJIVANSFB - Ujjivan Small Finance Bank Limited Share Price

Management Outlook:
Ujjivan SFB's management remains focused on diversifying its portfolio towards secured assets (targeting 40%-42% by FY25 end), expecting 50% YoY growth in secured segments (Affordable Housing, MSME, Vehicle Finance, etc.). Microfinance disbursements are rebounding, with January 2025 showing higher volumes. Asset quality is stabilizing, with improved collection efficiency in stressed states (West Bengal, Uttar Pradesh, Bihar). Credit cost guidance remains 2.3%-2.5% for FY25. NIMs are projected at 8.6%-8.8%, supported by cost optimization and product mix.

Key Points:

1. Portfolio Diversification: Secured book grew 52% YoY (39% of total loans). Affordable Housing (21% of book) and Micro Mortgages saw 45% and 34% YoY growth, respectively.
2. Asset Quality: GNPA/NNPA at 2.7%/0.6%. Bucket X collections improved to 99.2% in Q3. Stress in microfinance is stabilizing; slippages expected to normalize.
3. Deposit Growth: Retail deposits rose 24% YoY; CASA ratio targeted for improvement with digital initiatives (e.g., UPI app launch in Q4).
4. Strategic Initiatives:
   • Rate cuts (115 bps for group loans, 75 bps for individual loans) to attract quality borrowers.
   • Application submitted for transition to universal banking.
   • Expansion in high-yield segments (Vehicle Finance +155% YoY, Gold Loans in 198 branches).
5. Financial Metrics: Adjusted ROA/ROE at 1.1%/15.2%. Operating costs controlled (+1% QoQ).
6. Regulatory Compliance: Proactive adherence to 3-lender norms (effective April 2025) and guardrails to reduce borrower indebtedness.

FY25 Focus: Loan growth led by secured assets, improving CASA, and maintaining credit cost guidance.

Question 1:
Rajiv Mehta (Yes Securities):
"Sir, my first question is on the NDA collection efficiency, which is improved in December. So, have you seen the trend continuing January and the sites adding people for collection, are we also seeing any improvement in center meeting attendance or the loan officer at region? And just a follow up on this, have we also started seeing any improvement in resolutions and rollbacks in the SMA buckets in recent months?"

Answer Summary:
Collection efficiency improved month-on-month in October"“December, with January trends showing further progress. Center meeting attendance remains stable (~60%). SMA resolutions improved: SMA-0 (30% from 25%), SMA-1 (35% from 25%), and SMA-2 (25% from 21%) due to increased collection staff (345 added, totaling 2,260).

Question 2:
Rajiv Mehta (Yes Securities):
"Sir, my second question is on the credit cost. So, when you are maintaining credit cost guidance at 2.3%-2.5%, it implies a good decline in the 4th Quarter. So, then we are trying to rule out the possibility of taking any additional provision or accelerating the current provisioning policy. Would that be correct and what levels of PCR will be comfortable with maintaining because I can see that in this quarter PCR has improved, but we have also shifted floating provisions from standard to the NPA bucket. So, if you can also comment on what level of PCR you are comfortable in maintaining and whether the credit cost will go down in Q4 versus Q3?"

Answer Summary:
PCR is maintained at 70"“75%. Q3 credit costs included accelerated provisions of Rs.30 Cr to offset expected Q4 risks. FY25 credit cost guidance remains 2.3"“2.5%, with normalization expected post-Q3/Q4.

Question 3:
Renish (ICICI):
"Just two things from my side, one on the PAR zero bucket, so if we look at the group loans, it is at 6.6, IL it is at 4.5. Since you are also mentioning that collection is improving month-on-month, it is right to assume that the PAR level current numbers have picked out and going ahead, from Q4 onwards we would start seeing PAR portfolio coming down, even we will have write-off as well?"

Answer Summary:
PAR stabilization is expected in Q4, with incremental stress peaking. Recovery trends in West Bengal, Uttar Pradesh, and Bihar are improving. January disbursements (3 weeks) surpassed July"“December levels, signaling demand recovery.

Question 4:
Sarvesh Gupta (Maximal Capital):
"Sir, on the overall collection efficiency for the book, on the Secured side, did you see any stress in this and including January are you seeing any spillovers of the some of the stress in the microfinance on your Secured book?"

Answer Summary:
Secured book (housing, MSME, vehicle finance) shows stable performance: bucket X collections at 99"“99.5%. No spillover stress from microfinance observed.

Question 5:
Suraj Das (Sundaram Mutual Fund):
"Sir, in terms of if I see the yield on the Affordable Housing side that has come down significantly, 40 basis points on a Q-o-Q basis, where do you see this yield settling in 0.1 and the 0.2 is overall margin, what would be your guidance on margin going ahead now given that probably your Secured book is growing faster than the overall MFI book?"

Answer Summary:
Affordable Housing yield decline reflects RBI's EBLR-linked repricing (-50 bps), penal interest reclassification, and derecognition of Rs.9 Cr from slippages. NIMs to stabilize near current levels (8.6% in Q3), supported by high-yielding secured products (vehicle finance, micro-mortgages).

Question 6:
Nidhesh Jain (Investec):
"First question is on the Secured segment. What is the medium-term strategy with respect to Secured? Do you see share of Secured going up in FY26 and to what level you expect share of Secured going up?"

Answer Summary:
Secured book (39% of portfolio) targets 40"“42% by FY25-end and 60% by FY26, driven by housing, MSME, vehicle finance, and gold loans. Growth in secured segments offsets MFI yield compression.

Question 7:
Ritika Dua (Bandhan):
"Sir, two questions, just trying to understand the industry trends better. Hopefully, when you say that the demand or revival happened in January, could you just share some trends around that, what exactly because the perception is that it is actually not so much a demand issue, but more so like the fact that everybody had to meet the first regulatory guideline and that would have also meant some bit of growth coming off. So, when you say demand coming back, what do you mean by that?"

Answer Summary:
Demand recovery in January reflects improved collections in key states (UP, Bihar, West Bengal) and reduced industry turbulence. Disbursements in early January exceeded prior months, driven by customer confidence post-regulatory adjustments.

Question 8:
Shailesh Kanani (Centrum Broking):
"Sir, again on Slide #23, I understand our individual lending are basically the group loan customers who are graduated, so when we see Ujjivan +3 and Ujjivan 4, have we done any working in terms of those customers who can be graduated towards individual lending?"

Answer Summary:
Graduation from group to individual loans (15% of book) focuses on customers with strong repayment records. 40"“45% of micro-mortgage borrowers are graduated group-loan customers. Repeat customers (73% of disbursements) benefit from simplified digital processes.