As with other small financial banks, up to 70 percent of Ujjivan’s assets are currently unsecured/uncollateralized and a large majority of its clients are microborrowers. The remaining 30 percent fall under the category of secured loans. Management has set itself the goal of holding half of the assets in the secured segment over the next three years.
The Bengaluru-based microfinance bank-turned-small financial bank is also expecting to hit over 30 per cent this fiscal year, growing its loan book to around Rs 25,500 crore, helped by the sharp rise in disbursements in the June quarter as its sales rose over four -folds.
Since beginning its journey as a small financial bank in August 2017, Ujjivan has faced headwinds in terms of asset quality.
However, in the April-June 2022 quarter the lender’s net profit stood at Rs 203 crore against a net loss of Rs 233 crore in the Covid affected quarter in June 2021. The previous quarter from January to March 2022 was also at a net profit of Rs 127 crore profitable.
“In the next fortnight we will be offering gold loans to our MFI customers. We will be trialling it in 24 branches and expanding gradually and hope to close the current fiscal year with a gold loan book of around Rs 120 billion, Ittira Davis, CEO and CEO of Ujjivan told PTI.
“Similarly, we plan to extend the two-wheeler credit facility, which we reinstated to our MFI borrowers in the March quarter, to all customers starting in the final quarter of this fiscal year,” he said.
This is currently a book worth Rs 200 crore and Davis expects it to grow to Rs 350 crore by March 2023.
He said nearly 60 percent of auto loan customers are existing microlenders, while the rest are new customers. The bank halted auto loans during the pandemic. The other secured book includes home loans.
While gold loans are a more than fully secured asset, since regulators have capped such loans at 75 percent of gold’s market price, vehicle loans are 85 to 90 percent of the vehicle’s ex-showroom price.
On the loan sale plan, Davis said his optimism stems from record disbursements of Rs.4,326 crore in the first quarter of FY23, up from Rs.1,311 crore a year ago. This helped increase the loan book by 38 per cent to Rs 19,409 crore from Rs 14,037 crore in June 2021.
“We’re firing on all cylinders. Recovery is fully back as all parts of our business are now normal as is debt collection. We are on a solid recovery path and are confident of ending the year with credit growth and borrowing in excess of 30 per cent taking the loan book to around Rs 25,500 crore by March 2023,” Davis said.
The first quarter marks a great start to the new financial year. This is because “our stabilization efforts that started in the December quarter of 2021 are already bearing fruit as reflected in the trend reversal in the March quarter of 2022 when we reported net profit of Rs 1.27 crore he said.
Regarding collections, he said it is strong at 99 percent and this has helped gross non-performing assets and net non-performing assets rise to 5.9 percent and 5.9 percent, respectively, from 7.1 percent and 0.6 percent in March 2022 0.1 percent declined 9.8 percent and 2.6 percent respectively in June 2021.
Aside from near-complete collections, the improvement in asset quality was also driven by write-downs and recoveries, with first-quarter recoveries at Rs. 2.15 billion and write-downs at Rs. 65 billion, Davis said.
Its total income rose 40 percent to Rs 1,000.42 crore in the first quarter, of which interest income was Rs 905.37 crore, up 41.1 percent, and other income rose to Rs 95.1 crore from Rs 73 crore billion rupees. Key net interest income, which is interest earned after interest is paid, rose 56 percent to Rs 600 crore in the quarter.
In an interview with PTI in May, Davis said the bank would embark on a more balanced growth path by increasing the non-microcredit/secured loan book to 50 percent of assets over the next two to three years auto loans resumed.
Ujjivan, which began as a microfinancer in 2005, has 66,000 clients served by its 16,664 employees in 575 offices in 248 districts and 25 states.