Ujjivan Small Finance Bank, after facing headwinds amid the COVID-19 pandemic, is charting a more balanced growth path by increasing its secured loan portfolio to 50% of total assets over the course of two to three coming years.
As part of its asset diversification strategy, the lender has already resumed auto lending and plans to enter the gold lending space soon.
The Bengaluru-based lender, which started operations as a micro-financier in 2005, transformed into a small financial bank in 2017. It went black in the quarter of March 2022 with a net income of Rs 127 crore, but closed FY22 with a net loss of Rs 415 crore, maimed by the impact of the pandemic.
The lender held 68% of its assets in the unsecured micro-loan segments as of March 2022 and the remaining 32% (up from 27% in FY21) are secured accounts with housing and small business loans .
”Microcredit will continue to be the largest asset base for us in the short term, but over the next two or three years we want to increase the share of our secure portfolio to 50% from 32% currently, so that we don’t fall back into piles of bad loans as has happened over the past two years, Ittira Davis, managing director and general manager of Ujjivan, told PTI.
”As part of this diversification of the asset base, we have just re-launched our auto loan (two-wheeler financing) portfolio, which we had halted during the pandemic, and we hope to end this financial year with a book at Rs 120-150 crore, Davis said.
“The second step is to enter the gold lending industry, which is a fully secured, high-margin segment for all lenders. We hope to launch it by October/just before Diwali,” he added.
He said nearly 60% of auto loan customers are existing microlenders, while the rest are new customers.
Davis expects his asset base to touch Rs 20,000 crore this financial year, up from Rs 18,162 crore in FY22.
The company saw 20% growth in its asset base in FY22 compared to the prior year.
Davis said he expects record fourth-quarter loan sales to continue in FY23 as well. In the March 2022 quarter, he disbursed the highest amount of loans to Rs 4,870 crore, Davis said.
Ujjivan’s deposits rose by 39% to Rs 18,292 crore, driven by a 27% increase in the current account savings account, Davis said.
The bank saw an upturn in asset quality, with gross NPAs (non-performing assets) dropping from 11.8% in the second quarter and 9.8% in the third quarter to 7.1% in the fourth quarter, efficiency inflows reached 100% in March, and net NPAs fell from 1.7% to 0.6%.
The bank has a provision coverage ratio of 92% with a floating provision of Rs 260 crore, he said, adding that it wrote off Rs 200 crore of bad debts in the fourth quarter of FY22 Its total provisions stood at Rs 1,330 crore or covering 7.3% of the loan portfolio.
The company went public in December 2019 and is to increase the public float to 25% by December from 18% currently. This is done through a QIP number of Rs 600 crore, after which it will go for a reverse merger.
Davis expects the stock sale to occur in the second quarter of FY23.