UJJIVANSFB - Ujjivan Small Finance Bank Limited Share Price

Ujjivan Small Finance Bank's management provided a positive outlook during the quarterly earnings call. They highlighted that their strategic initiative to diversify and increase the share of secured loans is progressing well, with the secured loan portfolio now contributing 44% of the overall loan book, up from 30% the previous year. Q4 FY '25 had record disbursements of Rs.7,440 crores, marking a 39% increase quarter-on-quarter (Q-o-Q) and 11% year-on-year (Y-o-Y), while the gross loan book reached Rs.32,122 crores, a 5% increase Q-o-Q and 8% Y-o-Y.

Key points from management include:

1. The Housing segment experienced robust disbursements of Rs.1,130 crores, growing 39% Q-o-Q, with its loan book reaching Rs.7,308 crores (up 14% Q-o-Q and 48% Y-o-Y).
2. The MSME segment reported impressive disbursements of Rs.533 crores, an increase of 61% Q-o-Q, pushing the loan book to Rs.2,047 crores (21% Q-o-Q and 45% Y-o-Y).
3. The secured portion of the portfolio reflects strong growth, particularly micro mortgages (contributing Rs.723 crores) and vehicle finance (growing to Rs.468 crores).
4. The bank's total deposits rose to Rs.37,630 crores, a 20% increase Y-o-Y, contributing to a current account milestone of over Rs.1,000 crores.
5. Management expressed confidence in maintaining improvements in asset quality, with Gross NPA at 2.2% and a PCR of 78%.

Management plans to issue guidance for FY '26 alongside Q1 results, suggesting continued growth in secured loans while managing credit costs effectively, with an expected steady cost of funds reduction amid a diversification strategy.

Earnings Call Q&A Summary from April 30, 2025

1. Question: Is there an interest income reversal this quarter and can you quantify that? Answer: Yes, the interest reversal for the quarter due to slippages is in the range of roughly Rs. 17-Rs. 18 crores.

2. Question: How should we look at yields next year, particularly with the shift to secured lending? Answer: With the increasing secured mix, yields will moderate somewhat, but we're also working on growing higher-yielding segments like vehicle finance (20%+ yield), micro mortgages (19%+ yield), and gold loans (14%+ yield). These factors should help balance overall yields.

3. Question: What's the outlook on credit costs for FY '26 given our reduced SMA book? Answer: We expect a difference in credit costs between H1 and H2 of FY '26, with H1 likely seeing slightly elevated costs. However, we can provide clearer guidance post-Q1 results.

4. Question: How do you view the interest yield dynamics despite recent pricing changes? Answer: The increase in yields is due to our revised methodology, which reflects a higher proportion of individual loans and an ARC transaction affecting our interest accruals.

5. Question: What's the outlook for NIM with the increased secured loan mix? Answer: While there could be a slight reduction in NIM due to a higher secured mix, we expect notable cost reductions on fund side, aiming for about 25-30 bps decrease in cost of funds over the next year.

6. Question: Can you provide updates on the performance and profitability of secured businesses? Answer: We're focusing on profitability in products like vehicle and gold loans, aiming for a 2% ROA in these segments within the next 2-3 years, contingent on reaching significant AUM levels.

7. Question: Clarification on the OPEX increase"”what is driving the employee cost rise? Answer: The OPEX increase is a result of strategic investments for improving our secured book and enhancing collections. This trend should start to stabilize as disbursements grow.

8. Question: What's the outlook on group loans and individual loans with regard to collections and performance? Answer: We have seen positive trends in individual loans, which now contribute significantly to our growth. Group loans have faced challenges but are recovering in certain regions.

9. Question: Can you break down provisions, particularly for the Microbanking book? Answer: Approximately 87% of slippages came from Microbanking this quarter. We continue to maintain a PCR above 70% with the current provisions adequate given the comprehensive risk assessments.

10. Question: Can you update on the Universal Banking License application status? Answer: We filed for the Universal Banking License in February and are currently awaiting feedback from the RBI.

This concise summary captures the key inquiries and responses during Ujjivan Small Finance Bank's earnings call, providing a clear picture of the company's strategies and projections.