With an aim to enhance its secured asset portfolio, Ujjivan Small Finance Bank is soon foraying into the gold loan segment and also offering auto loans to non-micro borrowers.
Like other small finance banks, currently, 70 per cent of Ujjivan’s assets are unsecured/without collateral, and most of its customers are micro-loan borrowers. The remaining 30 per cent are under the secured loan category. The management has set a target of keeping half the assets in the secured segment over the next three years.
Bengaluru-based microfinancer-Small Finance Bank is also expected to hit over 30 per cent this fiscal and take its loan book to around Rs 25,500 crore, buoyed by a sharp rise in disbursements in the June quarter. When its sales exceeded four-fold.
Since the beginning of its journey as a small finance bank in August 2017, Ujjivan has been facing adversity on the asset quality front.
However, in the April-June 2022 quarter, the lender had a net income of Rs 203 crore, while the Covid-hit June 2021 quarter reported a net loss of Rs 233 crore. The previous quarter of January-March 2022 was also profitable with a net income of Rs 127 crore.
“In the next fortnight we will be offering gold loan to our MFI customers. We will operate it in 24 branches and scale it up gradually and expect to close the current financial year with a gold loan book of around Rs 120 crore, Itira Ujjivan’s managing director and chief executive Davis told PTI.
“Similarly, we plan to extend the two-wheeler loan facility, which we relaunched in the March quarter to our MFI borrowers, to all customers from the last quarter of this financial year,” he said.
Currently, it is a book worth Rs 200 crore and Davis expects it to increase to Rs 350 crore by March 2023.
He said about 60 per cent of auto loan customers are existing micro lenders while the rest are new customers. The bank had closed auto loans during the pandemic. Its other secured book also includes home loan.
While gold loans are more than fully secured assets, given that the regulator has limited such loans to 75 per cent of the market value of gold, vehicle loans are 85-90 per cent of the ex-showroom value of the vehicle.
On the debt sale plan, Davis said his optimism comes from disbursement of a record Rs 4,326 crore in the first quarter of FY23, as against Rs 1,311 crore a year ago. This helped it grow the loan book by 38 per cent to Rs 19,409 crore from Rs 14,037 crore in June 2021.
“We are firing on all cylinders. Recovery is back to full swing as all parts of our business are now normal and so is collections. We are on a solid recovery path and with over 30 per cent credit growth this year We are confident of closing and taking up a loan book of about Rs 25,500 crore by March 2023,” Davis said.
The first quarter is a great start to the new financial year. This is because “our stabilization efforts that began in the December 2021 quarter are already bearing fruit, as reflected in the turnaround in the March 2022 quarter, when we reported net income of Rs 127 crore, and June The quarter signifies all-round growth and profitability”. They said.
On collections, he said it is strong at 99 per cent and has led to a decline in gross non-performing assets and net non-performing assets by 5.9 per cent and 0.1 per cent, respectively, from 7.1 per cent and 0.6 per cent in March 2022. 9.8 percent and 2.6 percent respectively in June 2021.
Apart from the total collections, the improvement in asset quality was also on account of write-offs and recoveries, with Q1 recoveries at Rs 215 crore and write-offs at Rs 65 crore, Davis said.
Its total income grew 40 per cent to Rs 1,000.42 crore in Q1, of which interest income was up 41.1 per cent to Rs 905.37 crore, and other income increased by Rs 73 crore to Rs 95.1 crore. Principal net interest income, which is interest earned after interest payments, rose 56 per cent to Rs 600 crore during the quarter.
In an interview to PTI in May, Davis had said that the bank would move on a more balanced growth trajectory by increasing the non-micro loan/secured loan book to 50 per cent of assets over the next two-three years. The first step in this direction, it has reintroduced auto loans.
Ujjivan, which started as a microfinancer in 2005, has 6.6 million customers, served by its 16,664 employees through 575 branches spread across 248 districts and 25 states.