Ujjivan Small Finance Bank Ltd (UJJIVANSFB) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (ICICI Securities Limited): Ladies and gentlemen, good day and welcome to the Ujjivan Small Finance Bank Limited Q2 and H1 FY27 earnings conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Renish Bhuva from ICICI Securities Limited. Thank you and over to you, sir.
Renish Bhuva (ICICI Securities Limited): Thank you, Rituja. Hi, good evening everyone and welcome to Ujjivan Small Finance Bank Q2 FY27 earnings call. On behalf of ICICI Securities, I would like to thank Ujjivan SFB management team for giving us the opportunity to host this call. Today, we have with us the entire top management team of Ujjivan is represented by Ms. Carol Furtado, Whole-time Director and Interim CEO; Mr. Balakrishna Kamath, CFO; Mr. Ashish Goel, Chief Credit Officer; Mr. Vibhas, Head MicroBanking; Mr. Hitendracha, Head Retail Liabilities, Task and Third-party Products; Mr. Pradeep, Head Housing and Micro Mortgage; Mr. Martin, Chief Operating Officer; Mr. Brajesh, Chief Risk Officer; Mr. Siddhartha, Head Investor Relations, and Mr. Gaurav Shah, Investor Relations. I will now hand over the call to Carol ma'am for opening remarks, and then we'll open the floor for Q&A. Over to you, ma'am.
Carol Furtado (Ujjivan Small Finance Bank Ltd): Thank you, Renish. Good evening, and thank you all for joining us to discuss Ujjivan Small Finance Bank's Q2 FY27 earnings call. Please note, I will be referring to year-on-year comparisons with Q2 FY26 and quarter-on-quarter with Q1 FY27. I would like to start with few important developments before delving into the quarter. Post our MD, Mr. Sanjeev Nautiyal's decision to take an early retirement due to health reasons, the NRC is actively engaged to ensure timely submission of the MD candidate to the regulator. Our growth in H1 FY27 has been built on strategic capacity creation and product evolution. This is matched with pristine asset quality outcomes. We remain
Carol Furtado (Ujjivan Small Finance Bank Ltd): well positioned with regards to people, technology, systems, and risk management to continue this growth momentum. Within the shareholders approved resolution at the AGM, we propose to raise equity capital of rupees 409 crores from QIBs by issuing shares on a preferential basis to marquee investors, International Finance Corporation, Bajaj Life Insurance, HDFC Life Insurance, and Aditya Birla Sun Life Insurance, subject to shareholder approval. Holding the RWA constant at September '26, the proposed capital raise would increase CRAR by approximately 1.2% from 20.69% on a pro forma basis. Since fundraise is being done at a premium to current BVPS, it will lead to accretion of rupees 0.8 per share as of September '26. We remain nimble to the evolving needs of the bank. Thus, as shared, we have enhanced our funding mix by increasing the securitization pool by rupees 500 crores in October month. This will be NIM accretive and P&L neutral. Now coming to the operating environment. India's GDP, gross capital formation, and high-frequency indicators remain healthy and appear resilient to external shocks. Renewed conflict in the Middle East and increased volatility in global energy and freight prices are adding to inflationary pressures. In its latest MPC statement, the RBI raised its FY '27 GDP growth forecast to 7.1%, while the committee increased the repo rate by 25 bps and shifted to calibrated tightening. A deficient southwest monsoon and strong El Nino conditions pose risk to rural demand, while urban demand remains stable. Q2 of FY '27 has demonstrated another quarter of strong growth anchored on well-rounded credit growth and stable margins. Along guided lines, in H1 of FY '27, we have strengthened our distribution by adding 104 branches and 1,335 employees. We launched a well-curated brand campaign in September '26 with a new brand ambassador Padma Shri awardee Mr. R. Madhavan. Ujjivan today has evolved significantly in terms of its scale, reach, and breadth of offerings. The tagline, "Nothing small about us," reflects the scale of Ujjivan's aspirations, reach, and the breadth of financial solutions it offers. This campaign will be run across TV, print, and digital and is expected to reach around 35 crore viewers. Other institutional building spends on digital and technology have been set in motion and will reflect in H2. This quarter marked an important milestone as we crossed rupees 50,000 crore in deposits. Total deposits increased to rupees 50,643 crores, up 29.2% year-on-year, with CASA at 26%. We continue to add customers and increase volumes across our various deposit offerings. We benefited from the downward repricing of deposits, which helped maintain the cost of funds at around 6.9%. Although no rate hikes hikes were taken in Q2, the increase effected in Q1 would now start showing, and we expect the cost of funds to start moving upwards. In line with our strategy to expand services for depositors, we launched the ASBA facility in Q2. Going forward, we will focus on simplifying transactions, increasing awareness and adoption of newly introduced services, and deepening engagement with customers. The gross loan book clocked robust growth and reached rupees 45,699 crores, up 32.1% year-on-year. This translates to 12.4% YTD growth and are on track to meet the full-year guidance. The secured business lines continue to grow faster and now form 5
Carol Furtado (Ujjivan Small Finance Bank Ltd): 2.1% of the loan book. The unsecured piece consisting of micro banking delivered healthy growth reaching Rs 22,037 crore. This portfolio has grown approximately 6% in the first half of FY27 and remains on track to deliver around 12 to 14% for the full year. Some key callouts for the quarter in micro banking. Collection efficiency remains strong with bucket X collection efficiency at 99.7% in line with Q1 outcome. New customer acquisition increased sequentially with an addition of 2 lakh customers in Q2. Despite usual weather disruptions in July, August, September, we have delivered on healthy disbursements and collections. Going ahead, our endeavour is to make newly added branches come up the productivity curve. Our housing business is a key vertical for the bank that caters to the aspirations of our customer base. Affordable housing and micro mortgages combined crossed Rs 12,000 crores up 38.1% year-on-year. This quarter, the affordable housing crossed an important milestone by crossing Rs 10,000 crores mark and reached Rs 10,056 crores. Portfolio quality remains stable with PAR and GNPA at 3.7% and 1.2% respectively. The balance transfer out for Q2 was flat sequentially at 4.3%. We are targeting to preserve yields and are comfortable with the current growth levels. Micro mortgages growth remained strong. Loan book crossed Rs 2,000 crores, reaching Rs 2,031 crores, up 85.7% year on year. Portfolio quality continues to season at a comfortable pace with GNPA at 0.7%. The MSME business built on upon the capacities created and product changes grew to Rs 3,871 crores, up 51.3% year-on-year. The new book reached Rs 3,000 crores plus while maintaining GNPA of 0.5%. Gold loan continues to witness larger industry-wide tailwinds and grew to Rs 1,275 crores, up 209.8% year on year. In H1, we have added 117 branches and plan to expand to a similar number of branches in H2. The disbursement LTVs are maintained below 78%. Agri banking grew to Rs 914 crores, up 79.2% year-on-year. As part of strategy, we operate in select locations with due importance to environmental factors. Portfolio in Karnataka is Rs 165 crores. Out of this, Rs 1.2 crores is eligible under the relief scheme and direct agri exposure in Maharashtra is nil. Two-wheeler loans grew to Rs 1,081 crores, up 64.8% year on year. We are geared up for the festive season and expect enhanced business momentum. The asset quality performance as measured across parameters remain steady. The slippage ratio is at 1.6% of average gross loan book, while the credit cost came in at 0.7% of ATA. PCR continued to remain stable at 85% level. GNPA and NNPA remained healthy at 2.1% and 0.3% respectively. Total write off for the quarter was at Rs 59 crores. Financial performance. Robust asset growth translated into strong revenue momentum with total income reaching Rs 2,450 crores and NII rising 35% year on year to Rs 1,244 crores. Advances yield continues to be in comfortable zone and cost of funds remained
Carol Furtado (Ujjivan Small Finance Bank Ltd): stable leading to net interest margin at 8.4%. Other income for the quarter increased at a healthy 17% sequentially. Operating expenses increased by 6% quarter-on-quarter, wherein employee expenses increased by 3% quarter-on-quarter and other opex by 10%. The increased opex was on account of planned investments in our comprehensive brand campaign and ongoing branch network expansion. This has resulted in an all-time high quarterly profit after tax of Rs. 365 crores, with ROA of 2.4% and ROE of 19.7%. We are taking steps to optimize capital consumption and have seen CRAR improvement by 33 bps to 20.69% as of September 26. This is largely one-time, and we would resume consumption in a normalized run rate going forward. H2 outlook and guidance. Strong advance growth in H1 will support interest and related income growth run rate. However, the change in policy rates and resultant pass-through will lead to higher interest expenses than planned. While opex towards institutional build-out will accelerate, we anticipate a slower pace as planned. Asset quality outcomes are also expected to be along delivered lines. Considering these outcomes, we could overshoot our guided ROA range. We remain vigilant of revised monetary stance, risk of global rates and supply chain disruptions, coupled with weather-induced issues. Our high-frequency indicators across products for October remain in line with recent outcomes. IRDAI's notification is a consultation paper, and we await the final guidelines on the matter. We remain engaged with our insurance partners, as well as through IBA channels. Since discussions with IRDAI are ongoing and submissions are due on October 25th, it would be premature to elaborate further. However, we are closely watching the developments. Lastly, I would like to say that at Ujjivan, our strategic focus continues to be on diversified advances growth with shift towards secured assets, while we build the bank to provide Indians with the access to their financial aspirations. With that, I conclude my opening remarks and request the moderator to open the floor for questions. Thank you.
Moderator (ICICI Securities Limited): Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets and also to limit your questions to two per participant while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Shreepal Doshi from Equirus Securities. Please go ahead.
Shreepal Doshi (Equirus Securities): Hello, ma'am. Good evening, and thank you for giving me the opportunity and congrats on a good quarter. My first question was related to margins. So we this quarter, we have seen margin moderation of 10 basis points. Now, incrementally, we are looking at a much steeper rate upcycle and with with our aspiration to continue to focus on secured portfolio on the asset side, how do you see margin moving in the second-half of the financial year and also in FY '24 from here on?
Balakrishna Kamath (Ujjivan Small Finance Bank Ltd): Hi, Shreepal. The margin for Q2 was at 8.45. And as you rightly mentioned, repo rate has gone up by 25 bps. So, that will have an impact of around 10 bps on the margin. So, we we feel the margin could come down to around 8.35 for the second-half of the year. Now, coming to the mixed
Balakrishna Kamath (Ujjivan Small Finance Bank Ltd): Yes. Whatever is the impact, will be set off by planned DA which we are planning. So overall, the impact will be restricted to 10 bps, which will be resulting in an NIM of 8.35%.
Shreepal Doshi (Equirus Securities): All right. And sir, we Okay, got it. The second question was on the PAR-0 increase in group loans as well as in micro mortgages. And also, in terms of our key states like Karnataka and Maharashtra, there is drought-like situation which has been announced. So how do you see that, you know, impacting us as we speak in terms of collections as well as could it have any in deviation in our in our credit cost guidance for full year?
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