After facing Headwind in the Covid-19 epidemic, Ujjivan Small Finance Bank is paving the way for more balanced growth by increasing its secured loan book to 50 per cent of total assets over the next two to three years.
As part of its asset diversification strategy, lenders have already restarted automatic lending and plan to enter the gold lending space soon.
The Bangalore-based lender, which started its operations as a micro-financier in 2005, transformed itself into a small finance bank in 2017. It went black with a net income of Rs 127 crore in the March 2022 quarter, but closed with FY22. Net loss of Rs 415 crore has been incurred due to the impact of the epidemic.
As of March 2022, lenders have 68 percent of their assets in the unsecured micro loan segment and the remaining 32 percent (more than 27 percent in FY21) secured accounts with housing and small business loans.
“Microlending will continue to be our biggest asset base in the foreseeable future, but in the next two to three years, we want to increase our protected book portion from 32 percent to 50 percent,” Ittira Davis, managing director and chief executive of Ujjivan, told PTI. In the last two years, we have not been able to get back into bad debt.
” As part of this asset-based diversification, we have re-launched our auto loan portfolio (two-wheeler financing), which we discontinued during the epidemic, and we expect this fiscal year to end with a book of 120 120-150 crore. , Davis said.
The second step is to enter the gold loan business which is a completely secure and high margin segment for all lenders. We hope to launch it by October / just before Diwali, “he added.
About 60 per cent of auto loan customers are existing micro lenders and the rest are new customers, he said.
Davis expects its asset base to touch Rs 20,000 crore this fiscal, up from Rs 18,162 crore in FY22.
The company reported a 20 percent increase in assets on FY22 over the previous fiscal year.
Davis said he expects record debt sales in the fourth quarter to continue into FY23. In the March 2022 quarter, it disbursed a maximum of Rs 4,870 crore in loans, Davis said.
Ujjivan’s deposits rose 39 per cent to Rs 18,292 crore, leading to a 27 per cent increase in current account savings, Davis said.
Banks have seen a change in asset quality, with gross NPAs (non-performing assets) falling to 11.8 per cent in Q2 and 9.8 per cent in Q3 to 7.1 per cent in Q4, as collection efficiency touched 100 per cent in March, and net NPAs rose to 1.7 per cent. Fell to 0.6 percent.
With a floating provision of Rs 260 crore, the bank’s provision coverage ratio is 92 per cent, he said, adding that it had canceled bad loans of Rs 200 crore in the fourth quarter of FY22. Its total provision stands at Rs 1,330 crore or 7.3 per cent cover of debt books.
The company went public in December 2019 and the public float will now have to be increased from 18 per cent to 25 per cent by this December. This is being done through a Rs 600 crore QIP issue, after which it will be a reverse consolidation
Davis expects equity sales to occur in the second quarter of FY23.