UJJIVANSFB - Ujjivan Small Finance Bank Limited Share Price

The management of Ujjivan Small Finance Bank provided a detailed outlook for FY27, emphasizing a strategic focus on growth and diversification. Key highlights include:

1. Growth Target: Management expects to accelerate asset growth by approximately 25% for FY27. This will be supported by the addition of around 20% more branches, raising the total to approximately 916 branches.

2. Advances and Asset Quality: Advances are set to grow by about 25%, with a targeted credit cost moderation to 1.4%-1.5% of the average gross loan book (GLB). The secured assets are projected to constitute around 56% of the total portfolio, reflecting a strategic transition to a more balanced lending mix to enhance stability.

3. Profitability Metrics: Management anticipates a return on assets (ROA) of approximately 1.6% for FY27, slightly down from 2.0% in FY26, as a result of increased investment in technology and branch expansion. The net interest margin (NIM) is expected to stabilize around 8.5%, aided by cost reductions in deposits.

4. Capital Raise: A capital infusion of up to INR 2,000 crores has been approved to fuel growth. This move aims to ensure that the bank maintains a buffer above regulatory capital thresholds while also supporting ambitious growth plans.

5. Market Conditions and Risks: The outlook also reflects a cautious approach regarding geopolitical risks and domestic economic conditions which could impact growth and asset quality.

Overall, Ujjivan SFB is committed to maintaining a robust framework for sustainable growth while navigating the complexities of the financial landscape.

Q&A Section Summary from Ujjivan Small Finance Bank's Earnings Call (May 8, 2026)

Question 1: "We have an average ROE of more than 2%. Given that for the next year, we are guiding an ROA of around 1.6%, is this due to high opex growth? Will opex grow at 40-50%?"

Answer: "We will be investing in technology, digital, AI, and branch expansion, leading us to the projected ROA. Thus, I don't see anything unusual in our numbers despite the anticipated growth in expenses."

Question 2: "What are your growth aspirations for micro banking and housing loans, considering your segmental growth guidance is around 25%?"

Answer: "Micro banking will grow at a high single-digit rate. In contrast, the secured portfolio will expand significantly, enabling us to achieve our projected ROA of 1.6%."

Question 3: "Regarding the NIM, with a focus on securing loans, how do you expect margins to behave?"

Answer: "We anticipate NIMs to remain around the exiting quarter's levels, around 8.4% to 8.5%, due to stable yields and cost of funds management."

Question 4: "Considering your guidance on NIMs and opex, how do you foresee the ROA compression to 1.6%?"

Answer: "While opex will grow, we expect our cost-to-income ratio to remain stable compared to FY26. The ROA compression is primarily due to necessary investments for future growth."

Question 5: "What is your thought on secured loan growth and expected asset quality given your growth target of 25%?"

Answer: "We expect secured loans to grow around 40%, driven by improved execution and a diversified portfolio. Our asset quality remains robust with GNPA around 2.27%."

Question 6: "With the RBI's guidance, what secured to unsecured loan ratio target are you aiming for when you reapply?"

Answer: "We aim to gradually enhance our secured book ratio to upwards of 56% within the year to strengthen our application for transitioning to a universal bank."

Question 7: "Will you be raising equity capital soon, and when do you plan to do so?"

Answer: "We plan to initiate our equity raise in the second half of the current financial year, depending on market conditions and timing."

Question 8: "Given competitive pressures in terms of deposits, how do you remain optimistic about achieving your CASA ratio goal of 30%?"

Answer: "Our CASA ratio improved to 28.6%, and while competitive, we expect this growth trend to continue. We're focusing on a retail-driven deposit strategy to support our goals."

Question 9: "What are the specific planned expense increases for your operations as you transition your business model?"

Answer: "The increase will stem largely from branch expansions, technology enhancements, and increased marketing. However, we aim to keep the cost-to-income ratio consistent."

Question 10: "How do you assess the risk of your customer base from geopolitical tensions, especially with current events?"

Answer: "Our portfolio is primarily domestic, limiting our exposure to geopolitical shocks. We've stress-tested our portfolio and adjusted our monitoring for potential vulnerabilities."

This summary includes key questions and detailed answers reflecting the focus areas and financial outlook of the bank. Please feel free to request additional details or clarifications!