Ujjivan Small Finance Bank to have 50 per cent in secured loans over next 2-3 years

Ujjivan Small Finance Bank, after facing headwinds amid the COVID-19 pandemic, is on a more balanced growth trajectory by increasing its secured loan book to 50 per cent of total assets in the next two-three years. As part of its asset diversification strategy, the lender has already resumed auto loans and plans to enter the gold loan segment soon.

The Bengaluru-based lender, which started its operations as a micro-financier in 2005, transformed itself into a small finance bank in 2017. It turned black with a net income of Rs 127 crore in the March 2022 quarter, but closed FY22. Net loss of Rs 415 crore, hit by the impact of the pandemic.

The lender holds 68 per cent of assets in the unsecured micro-loan segment as of March 2022 and the remaining 32 per cent (up from 27 per cent in FY21) with housing and small business loans in secured accounts.

“Micro credit will continue to be the largest asset base for us in the near term, but in the next two-three years, we want to increase our safe book share from 32 per cent to 50 per cent, so that we can meet Ujjivan Managing Director and CEO Ittira Davies. He said that like the last two years, do not fall into the heap of bad debt.

“As part of this asset base diversification, we have relaunched our auto loan portfolio (two-wheeler financing), which we had closed during the pandemic, and we are looking to book this financial year at Rs 120-150 crore. Let’s hope to end with, Davis said.

“The second step is to enter the gold loan business, which is a fully secured and high-margin segment for all lenders. We expect to launch it by October/just before Diwali,” he added.

He said around 60 per cent of auto loan customers are existing micro lenders while the rest are new customers.

Davis expects his asset base to reach Rs 20,000 crore this fiscal, from Rs 18,162 crore in FY22.

The company registered a growth of 20 per cent in asset base in FY22 as compared to the previous financial year.

Davis said he expects record debt sales to continue in the fourth quarter in fiscal 2013 as well. Davis said it disbursed maximum loans of Rs 4,870 crore in the March 2022 quarter.

Davis said Ujjivan’s deposits grew 39 per cent to Rs 18,292 crore, leading to a 27 per cent increase in current account savings account.

The bank saw a shift in asset quality, with gross NPAs (non-performing assets) falling from 11.8 per cent in Q2 to 9.8 per cent in Q3 to 7.1 per cent in Q4, as collection efficiency reached 100 per cent by March, and net NPAs at 1.7 per cent. percent decreased to 0.6 percent.

The bank’s provision coverage ratio is 92 per cent with a provisional provision of Rs 260 crore, he said, writing off bad loans worth Rs 200 crore in the fourth quarter of FY22. Its total provision was Rs 1,330 crore or 7.3 per cent of the loan book.

The company went public in December 2019 and is to increase the public float to 25 per cent by this December from 18 per cent now. This is being done through a Rs 600 crore QIP issue, after which it will go for reverse merger.

Davis expects equity sales to take place in the second quarter of FY23.

Originally published at Pen 18