Ujjivan Small Finance Bank - Q2FY2023 Review

Ujjivan Small Finance Bank Limited reported net revenue of ₹20,482.35 crores for the quarter ended September 30, 2022, compared to ₹17,336.33 crores for September 30, 2021. Profit After Tax was ₹2,593.49 crores for the quarter ended September 30, 2022, compared to ₹1,100.59 crores during the corresponding quarter of the previous year, respectively.

Ujjivan Small Finance Bank - Investment Summary

Ujjivan Small Finance Bank - Overview

• On October 14, 2022, Ujjivan Financial Services announced on the stock market that the Board has authorised its plan to merge with Ujjivan Small Finance Bank (Ujjivan SFB).

• The plan is to go into force on the effective date and go into effect on the appointed date, which is April 1, 2023, or any other date that the NCLT may accept.

• Ujjivan Small Finance Bank issued approximately 22.6 crore shares at an issue price of ₹21 per share as of September 15, 2022, in order to raise 475 crores through a qualified investment plan.

Ujjivan Small Finance Bank - Quarterly Summary

Business

• A subsidiary of Ujjivan Financial Services Limited, USFB was established on July 4, 2016. (UFSL). The RBI listed the Bangalore-based microfinance company UFSL as an NBFC-MFI.

• Since 2005, it has been providing microloans to women who are self-employed and salaried through its joint liability group (JLG) model in urban and semi-urban areas.

• Following the "Guidelines for Licensing of Small Finance Banks in the Private Sector" (Guidelines) that the Reserve Bank of India (RBI) announced on November 27, 2014, UFSL was one of the ten companies to receive "in-principle" clearance from the RBI on September 16, 2015, to establish a bank.

• The RBI subsequently authorized USFB to conduct banking operations in India on November 11, 2016. As a result, USFB officially started operating on February 1, 2017; as per the terms of the Business Transfer Agreement (BTA) that was signed between UFSL and USFB on that date, all of UFSL's assets and liabilities were transferred to USFB.

• On December 12, 2019, Bank completed its IPO process and was listed on the NSE and BSE.

• During FY 2021-22, the bank’s Business Segments are:

  • Treasury Segment:

    • The money market borrowing and lending, gains or losses on investment activities, net interest income from the bank's investment portfolio, and proceeds from the sale of PSLC make up the majority of the Treasury Segment.

  • Retail Banking Segment:

    • Through a branch network and other delivery mechanisms, the retail banking segment provides services to consumers.

    • Lending to and accepting deposits from retail consumers are both included in retail banking, along with tracking segment revenue and costs.

    • Interest on consumer loans, processing fees, and other related incomes make up the retail banking segment's revenues.

  • Corporate/Wholesale Banking:

    • Corporates and financial institutions can get loans from the wholesale banking segment. Interest on customer loans is what the wholesale banking industry uses to generate revenue.

    • The segment's principal costs include interest on money borrowed from external sources and other internal segments, as well as allocated costs for delivery channels, specialised product groups, processing units, and support groups. Additional direct costs include personnel costs, premises expenses, and other direct overheads.

• Out of the total revenue, 9% has been generated from Treasury operations, 2% from wholesale Banking, 9%, and 89% from Retail Banking s in FY 2022 compared to 10%, 2%, and 88% in FY 2021, respectively.

Ujjivan Small Finance Bank - Revenue Trend

Ujjivan Small Finance Bank - SWOT ANALYSIS

• Strength

  • Company with zero promoter pledge.

  • FIIS has increased its shareholding.

  • Geographically well-diversified portfolio.

  • Improving Profitability.

• Weakness

  • Net profit is declining in the last two years.

  • Insufficient use of assets to generate profit.

  • Exposure to the inherent risk of the microfinance sector.

• Opportunity

  • Decrease in NPA in the recent result.

  • Decrease in Provision.

  • Increasing capital expenditure by the companies.

• Threat

  • Increasing competition in the financial sector.

  • Ongoing uneven circumstances globally (e.g., Inflation).

Ujjivan Small Finance Bank - Ratio Analysis

Ujjivan Small Finance Bank - Financial Overview

Ujjivan Small Finance Bank - Profit and Loss Statement (₹ in crores)