InvestorQ : How so you see the performance of the recently listed Ujjivan Small Finance Bank in the Sep-20 quarter?
Sam Eswaran made post

How so you see the performance of the recently listed Ujjivan Small Finance Bank in the Sep-20 quarter?

Moii Chavate answered.
6 months ago

The recently listed Ujjivan Small Finance Bank is part of the Ujjivan group. For the Sep-20 quarter, it has reported 12.15% increase in top line revenues at Rs.818 crore. As you must be aware, these small finance banks basically cater to the micro customers. Quite often, they are also the last mile for banks and have not really faced any COVID impact on flows.

With the RBI consistently cutting rates and infusing liquidity, the SFB operating profits benefited from a sharp fall in the interest costs on a comparative basis. For example, in the Sep-20 quarter, operating profits were up 64.21% at Rs.232 crore. It resulted in OPM expanding sharply from 19.39% to 28.38%; an expansion of over 900 basis points in Q2.

However, the growth in the bottom line was not all that impressive in the quarter. For example, the Profit after tax or PAT for the Sep-20 quarter grew by just about 3.64% to Rs.96 crore, suggesting that the full impact of the operating robustness did not pass on.

This was on account of substantially larger provisions for doubtful assets in the quarter which went up nearly 4-fold in the quarter to Rs.100 crore compared to just about Rs.26 crore in the Sep-19 quarter. This resulted in the PAT growth tapering and as a result even the PAT margins for the quarter were down nearly 100 basis points at 11.74% in Q2.

Let us now turn to the asset quality. Gross NPAs of the bank at 0.98% in the current quarter are extremely comfortable. Also, net NPAs at 0.14% indicates that most of the asset quality concerns are provided for and so any asset quality issues may be close to bottoming out.

One key metrics is return on assets. The ROA of the Ujjivan SFB is sharply down from 0.65% to just about 0.50% this quarter. However, the good news is on the capital adequacy from. At a level of nearly 31%, the Ujjivan Small Finance Bank has enough engines to power its growth to a higher level in the coming quarters.