Tag: Ujjivan Small Finance Bank

Sebi relaxes minimum promoter lock-in norm for Ujjivan SFB, Ujjivan Fin Services for amalgamation, BFSI News, ET BFSI

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Markets regulator Sebi has provided relaxation with regard to the minimum promoter lock-in norm to Ujjivan Small Finance Bank (SFB) and its promoter Ujjivan Financial Services, for the purpose of their amalgamation. On October 30, the bank had approved the scheme of amalgamation between Ujjivan Financial Services (transferor company) and Ujjivan SFB (transferee company).

Following this, it had submitted a joint application on behalf of the transferor/promoter to Sebi, seeking relaxation of the three-year minimum promoter lock-in requirements.

Besides, it also sought approval to adopt the proposed scheme of amalgamation as a method to achieve the minimum public shareholding.

“…we hereby inform you that the Sebi, vide its letter dated December 2, 2021, has acceded to our request to relax the three-year minimum promoter lock-in requirements,” it said in a regulatory filing.

The exemption is subject to no-objection certificate (NOC) from the exchanges and final approval by the National Company Law Tribunal (NCLT).

“The exemption being granted from lock-in is only for the period commencing after approval of the proposed scheme of amalgamation by NCLT and till expiry of the lock-in period,” it said citing the Sebi letter.

However, the Sebi specified that the relaxation is granted to them for the “specific purpose of scheme of amalgamation” between Ujjivan Financial Services and Ujjivan SFB and “shall not be treated as a precedence”.

Further, as advised by Sebi, the bank will initiate necessary steps to ensure compliance with minimum public shareholding requirements through mode specified under Sebi circular dated February 22, 2018, it added.

Currently, Ujjivan Financial Services holds 83.32 per cent of the equity shareholding and 100 per cent of preference shareholding of Ujjivan SFB.

As per the minimum shareholding norms, the promoter’s minimum initial contribution in the SFB arm should be at least 40 per cent. If the promoter’s initial shareholding in the SFB is in excess of 40 per cent, it is to be brought down to 40 per cent within a period of five years from the date of commencement of operations of SFB.

This period of five years is expiring on January 31, 2022.



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RBI appoints additional director on board of Ujjivan SFB

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The Reserve Bank of India has appointed P.N. Raghunath, General Manager, Reserve Bank of India, as an Additional Director on the board of Ujjivan Small Finance Bank for a period of two years.

“…we hereby inform you that the Reserve Bank of India vide its letter dated November 29, 2021, has appointed PN Raghunath, General Manager, Reserve Bank of India, Bengaluru, Regional Office, as an Additional Director on the board of the bank for a period of two years with effect from November 29, 2021 to November 28, 2023 or till further orders, whichever is earlier,” Ujjivan SFB said in a stock exchange filing on Monday.

Previously, the RBI had on September 16 appointed a special committee of directors, with three independent directors as members, to oversee the day-to-day operations.

The bank has been facing some amount of turmoil in recent months. Its Managing Director and CEO, Nitin Chugh, resigned earlier this year.

The lender has also had problems with asset quality as gross non-performing assets surged to Rs 1,712.65 crore or 11.8 per cent of gross advances as on September 30, 2021.

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Ashwin Khorana joins Ujjivan Small Finance Bank as CIO, BFSI News, ET BFSI

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Veteran CIO, Ashwin Khorana has joined Ujjivan Small Finance Bank as CIO. With over three decades of experience, most of which has been in the BFSI sector, he has been instrumental in designing and strategizing the technology roadmap of some of the leading banks in India.

Most recently Khorana was a technology advisor and consultant CIO before joining Ujjivan Small Finance Bank. Prior to that he served as the CIO of Jana Small Finance Bank.

Khorana sees himself as a generalist across the entire financial technology landscape and a master of core areas. Combining his strategy strength with deep technology as well as strong domain expertise in the BFSI sector has made him among the top technology thought leaders in the sector.

Among the leading companies where Khorana has worked in a technology leadership role include Janalakshmi Financial Services, ING Vysya Bank (now Kotak Mahindra Bank) and Standard Chartered Bank among others.

Through his career Khorana has been involved in various Core Banking implementations and has handled solution delivery for Securities Services, CRM, Basel II, Customer Analytics, Credit and Debit Cards, Credit Risk, Payments, Internet Banking, eCommerce & digital initiatives.



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Ujjivan Financial Services Q2 loss at Rs 68 cr, BFSI News, ET BFSI

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Ujjivan Financial Services on Saturday reported a consolidated net loss of Rs 68.18 crore for September quarter 2021-22. It had posted a net profit of Rs 89.76 crore in the year-ago same period. Sequentially, the net loss narrowed from Rs 99.33 crore in quarter ended June 2021.

Total income was down at Rs 731.90 crore in the quarter under review as against Rs 828.47 crore in the year-ago period, Ujjivan said in a regulatory filing.

Expenses were higher at Rs 822.73 crore during the quarter. In the year-ago period, expenses stood at Rs 704.95 crore.

“Barun Kumar Agarwal, CFO of the company has tendered his resignation from the company to take up a senior position role in the finance department of the bank,” the filing further said.

His resignation from the company will be effective from November 15, 2021 (close of business hours), it said. Ujjivan Financial Services is the parent company of Ujjivan Small Finance Bank. PTI KPM ANU ANU

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Healthy collections, focus on reducing stressed asset flow will aid asset quality in H2FY22: Carol Furtado, COO, Ujjivan Small Finance Bank

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Also, the aspiring middle class [is] an area we will be focusing on, and we have various segments like senior citizens, small traders, and manufacturers, so we will be introducing value-added products for these segments.

By Piyush Shukla

Ujjivan Small Finance Bank is likely to witness an improvement in the asset quality in the second half of the current fiscal on the back of overall healthy collections and higher focus on reducing flow of stressed loans towards NPA category, Carol Furtado, chief operating officer, Ujjivan Small Finance Bank, tells Piyush Shukla. Excerpts:

Your disbursements in July-September rose sharply, but overall gross advances grew 5% to Rs 14,514 crore. What is your credit growth outlook?

The economy has opened, and all our business verticals are doing well. We had given a growth guidance of 15-20% or so sometime in August; we are keeping up to it. Since the economy has opened, we are aiming to get all our business lines to contribute well, and September and October have been good months for us. We hope to see even double the growth in November. [We are doing quite well in our] 100 days’ plan, where rebuilding our business momentum was one of our key focus areas … and disbursements in the second quarter (Q2FY22) have improved to Rs 3,000-plus crore, which is around 114% growth year-on-year and around 138% quarter-on-quarter. So improvement is across all business verticals.

Are there any new loan products in the pipeline?

Yes, this year … we will also be launching products like the ECLGS (Emergency Credit Line Guarantee Scheme), CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises), the MSE (micro and small enterprises) segment and GST-based working capital finance and some products in the healthcare segment. On the personal loan side, we will be expanding it to balance transfer, pre-approved loans and pre-approved digital products. So those will be the kind of new products that we will be launching. But our focus is on core, and some of the other products that we are incubating we will continue to do so and maybe in the next financial year we will take it up for review.

Your retail deposits account for 52% of the overall book. Where do you think its share will be at the end of the current financial year?

We will go more granular in our retail liabilities strategy and that should serve two purposes: stickiness and low cost. We are more focused on delivering value to the customers in the form of customer service and products that will be the need for each segment, and we want to gain customer loyalty in this segment so that is where our focus is. Also, the aspiring middle class [is] an area we will be focusing on, and we have various segments like senior citizens, small traders, and manufacturers, so we will be introducing value-added products for these segments.

As you move gradually towards non-micro finance loans, till when will you be able to maintain net interest margin (NIM) at 8.1%?

NIMs are currently subdued as GNPA are high. Actual yields in businesses are intact. Over the next few years, with change in business mix, there will be some reduction in overall yield. However, current NIMs are not comparable due to derecognition of interest income on GNPA pool of 11.8%.

You spoke about higher bad loans. Do you think that GNPAs have peaked at 11.8% and what is your view on asset quality in FY22?

Collections have picked up well. We are focused on reducing PAR (portfolio at risk) flow to higher buckets, collections from restructured and NPA pool, further increasing overall collections. With this context, we believe things in H2 (Oct-March) would be better on the credit quality front.

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HDFC Securities , BFSI News, ET BFSI

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HDFC Securities has reduce call on Ujjivan Small Finance Bank Ltd. with a target price of Rs 20. The current market price of Ujjivan Small Finance Bank is Rs 21.

Time period given by analyst is one year when Ujjivan Small Finance Bank Ltd. price can reach defined target.
Ujjivan Small Finance Bank Ltd., incorporated in the year 2016, is a banking company (having a market cap of Rs 3638.10 Crore).

Ujjivan Small Finance Bank Ltd. key Products/Revenue Segments include Interest & Discount on Advances & Bills, Income From Investment, Interest On Balances with RBI and Other Inter-Bank Funds for the year ending 31-Mar-2021.

Financials
For the quarter ended 30-09-2021, the company reported a Standalone Total Income of Rs 691.93 Crore, down -3.40 % from last quarter Total Income of Rs 716.29 Crore and down -15.41 % from last year same quarter Total Income of Rs 818.01 Crore. The bank reported net profit after tax of Rs -273.79 Crore in latest quarter.

Investment Rationale
Ujjivan SFB reported yet another quarter of loss at INR2.74bn as the stressed pool remained persistently elevated. While the aggregate stress pool (PAR>0) declined sequentially from 31% to 19%, the excessive stress suggests normalisation would be delayed beyond FY22. Restructured book increased from 5.5% to 10.2% sequentially, with loan loss coverage at 75% (including INR0.25bn of COVID provisions), driven by accelerated provisioning at ~10.4% of gross advances. Business momentum was revived with disbursals of INR31.2bn (near pre-COVID levels) and a declining share of MFI loans (70%). With limited visibility of RoA reflation and a stubborn stress pool, it downgrades Ujjivan SFB from ADD to REDUCE with a revised TP of INR20 (earlier INR34) and downgrade Ujjivan Financial Services from BUY to ADD with a revised TP of INR189 (earlier INR322).

Promoter/FII Holdings
Promoters held 83.32 per cent stake in the company as of 30-Sep-2021, while FIIs owned 0.56 per cent, DIIs 0.76 per cent.



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Submitted two names for MD and CEO to RBI: Ujjivan SFB

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Ujjivan Small Finance Bank has submitted the names of two candidates to the Reserve Bank of India for the post of Managing Director and CEO. It also expects the amalgamation with Ujjivan Financial Services to be completed in the next 12 months.

Exuding confidence that the worst is over for the lender, Carol Furtado, Chief Operating Officer, Ujjivan SFB said the bank will focus on four key areas.

“We will be focusing on improving our portfolio quality and rebuilding our business volumes. We still want to work a lot more on retaining our talent. And digital will also be a focus area,” she told BusinessLine in an interaction.

Problems aplenty

The lender has seen a lot of attrition, including the exit of its MD and CEO Nitin Chugh earlier this year, and has been facing problems of mounting bad loans.

It reported a net loss of ₹273.79 crore for the second quarter of the fiscal due to higher provisions and lower income. Gross non-performing assets surged to ₹1,712.65 crore or 11.8 per cent of gross advances as on September 30, 2021.

“We have submitted two names as per the RBI requirement within the given timeline. We are expecting a revert from their side,” Furtado said, adding that the bank has also shortlisted people for multiple positions who are expected to join shortly.

“We have a very strong internal leadership team in place who are very well capable of taking the strategy of the bank,” she further said.

Ujjivan SFB is also expecting a much better second half of the fiscal year. “The economy is turning positive and the business seems to be getting better. We have been able to strengthen our collections, we have made adequate provision and our GNPAs have also peaked,” she said.

Disbursements in the third quarter have improved and credit demand has increased.

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Ujjivan Small Finance Bank net loss widens to Rs 274 crore on poor asset quality, higher provisions

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According to a release issued by the bank, its disbursement increased to Rs 3,122 crore in the reporting quarter, higher by 114% on-year and 138% on a sequential basis.

Ujjivan Small Finance Bank (SFB) on Monday reported a net loss of Rs 274 crore for the quarter ended September 30, owing to poor asset quality and higher provisions. The lender had logged a net loss of Rs 233 crore in the previous quarter. It, however, had reported a net profit of Rs 96 crore a year ago.

During the quarter under review, Ujjivan SFB’s gross non-performing asset ratio (NPA) rose sharply to 11.80% from 9.79% as on July-end and 0.98% a year ago. Net non-performing assets rose to 3.29% as on September-end from 2.68% a quarter ago and 0.14% in the corresponding quarter of the previous year.

Owing to deteriorating asset quality, Ujjivan SFB’s provisions rose to Rs 436.88 crore in the reporting quarter, lower than Rs 473.21 crore in the previous quarter.

“We have done major restructuring and taken accelerated credit provisions during the quarter. We believe, subject to potential third wave of Covid, our GNPA has peaked out and will gradually reduce hereon,” said Martin PS, officer on special duty at Ujjivan Small Finance Bank.

In the reporting quarter, the lender has restructured total loans amounting to Rs 962 crore, taking the total quantum of restructured loans to Rs 1,480 crore. It has made Rs 504-crore provision against its restructured book as on September-end, as per its investor presentation.

According to a release issued by the bank, its disbursement increased to Rs 3,122 crore in the reporting quarter, higher by 114% on-year and 138% on a sequential basis. Its gross advances, as on September-end, stood at Rs 14,514 crore, up 5% on year.

“We continue to focus on diversification with non-micro banking book contributing 34% (as against 32% as of June’21) to the total asset portfolio. We have acquired 1.8 lakh new retail customers during the quarter; retail deposits proportion increased to 52% of the total deposits, as against 48% as of June’21,” said Martin P.S.

Net interest income—difference between interest earned and expended—increased 17% on a yearly basis to Rs 391 crore in the reporting quarter, while the net interest margin stood at 8.1%, lower than 10.2% a year ago.

Total deposits rose 31% on-year to Rs 14,090 crore as on September-end, when the capital adequacy ratio stood at 22.2%, lower than 31% a year ago.

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Loan recovery improving, says Ujjivan Small Finance Bank, BFSI News, ET BFSI

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Ujjivan Small Finance Bank, which is going through a management level crisis, declared that its loan recovery from ground improved and portfolio at risk reduced in August.

The bank said its action plan aiming to improve asset quality started yielding results. The portfolio at risk (PAR) reduced to 21.7% from 30.8% in June with Rs 725 crore loan recovery. PAR was 25.2% in July. The lender’s collection efficiency improved to 95% in August from 93% in July, according to a regulatory filing to stock exchanges..

Chief executive Nitin Chugh resigned on August 18 after the bank’s holding company Ujjivan Financial Services raised alarms over his alleged mishandling of asset quality and human resource. The bank saw a series of exits from senior and mid-management level. Several board members also resigned before their scheduled term over the past one year.

The gross non-performing asset ratio rose further to 11.9% at the end of August from 10.8% a month back.

The bank said it is following a 100-day action plan for each business vertical with focus on PAR reduction and bad loan recovery with periodic monitoring and corrective action. The focus is on initial buckets and vintage of accounts for reducing PAR and further strengthening collection team and legal recovery for small enterprise loans and affordable housing loan portfolio.

Its gross loan portfolio rose marginally to Rs 14334 crore by the end of August from Rs 14, 137 crore a month back. Gross loan was at Rs 15,140 crore at the end of March. The unsecured microfinance loans contribute 67% of its total portfolio.

The bank’s restructured portfolio rose to Rs 1,405 crore from Rs 769 crore at the end of June.



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After CEO’s exit, Ujjivan SFB trying to get the house in order

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Ujjivan Small Finance Bank is seeking to get its house in order after the sudden announcement of the exit of its Managing Director and CEO Nitin Chugh last month, and the old order is likely to make a comeback at the lender.

Three independent directors including BA Nambiar – Chair Designate, Ujjivan SFB, Rajni Mishra – Chair of Risk Committee, and Ravichandran Venkataraman – Chair of Nomination and Remuneration Committee, are a part of the RBI approved Special Committee of Directors to oversee the operations and administration of the bank, Samit Ghosh – Common Director on Ujjivan SFB and Ujjivan Financial Services told BusinessLine in a message. He, however, did not respond to requests to speak further on the bank.

Also see: Making the banking sector more vibrant

“It looks like the old order strikes back with Samit Ghosh wanting to retain control of the likely merged entity. The Reserve Bank of India has now allowed merger with holding companies,” noted an expert who did not wish to be named.

“Bank has started working internally along with the Holding Company to initiate various steps for effecting the reverse merger,” Chugh had said in the annual report.

Significantly, Carol Furtado who has been appoitned as Officer on Special Duty (OSD) and will then take charge as Interim CEO, has been a part of the Ujjivan Group since 2005 and was designated at Ujjivan SFB as Head of Operations and Service Quality. Subsequently, she moved into Ujjivan Financial Services, serving as the CEO.

Annual general meeting

The lender is scheduled to hold its annual general meeting on September 27 where it will have to address shareholder queries on reasons for top level exits from the management.

The AGM has also sought shareholders’ approval to appoint Samit Ghosh and Sudha Suresh as non-executive non-independent directors and appointment of Rajni Mishra, Banavar Anantharamaiah Prabhakar, Rajesh Kumar Jogi and Ravichandran Venkatarama as independent directors on the board of Ujjivan SFB.

The bank’s management has remained tight lipped about these recent developments, although there have been indications that some felt there was undue interference from the holding company – Ujjivan Financial Services.

Ujjivan SFB did not respond to a query from BusinessLine on the issue.

Chugh’s resignation

In a stock exchange filing on August 19, Ujjivan SFB had said Chugh has tendered his resignation as MD and CEO citing personal reasons. He will step down from the role on September 30.

Analysts had noted at the time that while the press release indicated that Chugh’s resignation was due to personal reasons, the impression from the analyst call was that it was mainly due to the bank’s persistent under performance on the asset-quality front, delayed recognition and correction of NPAs in MFI, and large-scale attrition at the lower-middle level.

“In our view, apart from the bank’s under performance, some niggling issues with the old management and his incompatible new-age management style in the still MFI-dominated old school bank, could also have contributed to the resignation,” Emkay Global had said in a note last month.

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