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Microfinance Firm Ujjivan To See Business As Usual Next Financial Year, Says CFO

Ujjivan Financial Services sees net profit slide 9.5 percent sequentially in Q3



A woman receives a micro-loan during a meeting organized by a microfinance company in Sadasivpet, India (Photographer: Adeel Halim/Bloomberg)
A woman receives a micro-loan during a meeting organized by a microfinance company in Sadasivpet, India (Photographer: Adeel Halim/Bloomberg)

The impact of demonetisation on the third-quarter results of Ujjivan Financial Services Ltd. is evident, but collections are improving and the next financial year should see business return to normal, Chief Financial Officer Sudha Suresh told BloombergQuint in an interview.

Microfinance company Ujjivan is among the entities that have received a small bank licence from the Reserve Bank of India. It aims to complete its transformation and launch services in the first week of February from Bengaluru.

Demonetisation has had an impact in the third quarter, said Suresh. “The loan portfolio growth was static compared with the previous quarter. Loan disbursement was somewhat reduced, and we did not acquire new customers, so new business came down.”

The company disbursed loans worth around Rs 550 crore in November and Rs 415 crore in December to existing customers, Suresh said. This is lower than its monthly average of around Rs 600 crore.

Overall disbursements during the quarter stood at Rs 1,662.8 crore, down 0.6 percent sequentially, but 24 percent higher than the corresponding period a year ago.

Ujjivan’s net profit in the third quarter declined 9.5 percent sequentially. This, according to Suresh, was primarily on account of costs related to its transition to a small finance bank, and higher provisions.

Though gross non-performing assets rose to Rs 14 crore in the December quarter from Rs 10 crore as on September 30, the company set aside Rs 54 crore as provisions, nearly seven times the number in the previous quarter.

“We have seen that repayments are coming in, but with a lag... (as reflected) by the improvement in the collection efficiency in January,” said Suresh.

The company made higher provisions despite a 90-day repayment relief provided by the RBI to small borrowers to tide over cash crunch triggered by demonetisation.

In November, the RBI had said that term and working capital loans, where the original sanctioned limit is less than Rs 1 crore, would get an additional 60 days to make payments. The loans would not be classified as non-performing assets within the extended period. The central bank later extended the window by another 30 days.