Capitaline

Analyst Meet / AGM 23-Jan-20

Conference Call

Ujjivan Small Finance Bank

Expects to improve RoE to 17-18% in next 3-5 years

Ujjivan Small Finance Bank conducted a conference call on 22 January 2019 to discuss financial results for the quarter ended December 2019. Nitin Chugh, MD and CEO of the bank addressed the call:
Highlights:

The bank has complied with the Small Finance Bank licensing requirement of listing by end January 2020. The IPO of the bank was well received by the markets and was 101 times subscribed making it the most successful IPO of 2019.
Post IPO, the promoter shareholding in the bank has declined to 83.3%, which has to be further reduced to 40%. The bank is mooting various options for reducing promoter shareholding, while it is yet to start dialogue with RBI on the option of reverse merger.
The bank has posted 18% growth in disbursement in Q3FY2020 and loan book moved up 46% end December 2019.
The share of non-micro banking loan book has increased to 22%. The bank expects micro and non-micro loam mix to be 50-50 in next 3-5 years. Within micro, the focus is on individual loans.
The bank has witnessed some slowdown in micro-banking and it is closely watching the situation. With regard to microfinance exposure to Assam, the bank has exposure of Rs 424 crore or 3.5% to total gross advances with 18 branches. However, the exposure stands at 1.4% in impacted area of Upper Assam with 7 branches. The bank has made provisions of Rs 5 crore for Assam book.
The cumulative collection efficiency of the company was healthy at 98%, while the bank does not see any further deterioration in Assam book.
The bank has maintained strong asset quality in the quarter ended December 2019.
The cost-to-income ratio was within the target of 72% for FY2020. The bank proposes to reduce cost-to-income ratio to 70 by end March 2021 and reduce further by 5 percentages every year to 55% by March 2024.
The bank is witnessing good traction on retail and casa deposits. The share of retail deposit has improved to 43%. The bank aims to improve CASA ratio to 14% by March 2020 with the focus on small ticket CASA deposits and improve further to 25% in the medium term of 3-5 years.
The share of top depositors is reducing gradually, while the top 10 depositors account for 19% of total deposits.
The bank expects to build strong liability franchise with branches and technology in place. The bank would continue calibrated branch expansion, while continuing investment in technology.
The bank remains focused on building a technology led Mass Market Retail Bank with focus on differentiated digital and service experience and financial inclusion covering the under-served and unserved.
Vehicle loan product is in pilot stage, while bank has tied up with electric vehicle manufacturers. The bank has hired some people for the vehicle segment.
The bank expects to improve RoE to 17-18% in next 3-5 years.

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