A woman holds the loan she has received, a stack of rupee bills, during a meeting organized by SKS Microfinance Ltd. (Photographer: Adeel Halim/Bloomberg)

Ujjivan Financial Hopes To Shrug Off Its Demonetisation Woes Soon

Ujjivan Financial Services Ltd. saw losses narrow in the July-September quarter moving closer to turn around the lingering impact of demonetisation on its business.

Consolidated net loss of the microfinance company stood at Rs 11.9 crore compared to a loss of Rs 75 crore in the previous quarter, according to a stock exchange filing. Net interest income rose 19 percent sequentially to Rs 164.6 crore. The consolidated results include the holding company Ujjivan Financial and its wholly-owned subsidiary Ujjivan Small Finance Bank.

The significant reduction in losses was due to “lower credit cost and business volumes returning to normal levels”, Samit Ghosh, managing director and chief executive of Ujjivan Small Finance Bank said in a media statement.

We expect credit costs to taper off to normal levels in the next two quarters and with business growth, we are on our way to a complete turnaround after absorbing the impact of demonetisation on our business environment
Samit Ghosh, MD & CEO, Ujjivan Small Finance Bank

The lender’s asset quality improved after seeing a spike in bad credit during the April-July period due to poor recovery of loans from the demonetisation period. Gross bad loans, as a percentage of total assets fell to just under 5 percent compared to 6.16 percent in the previous quarter. Net NPAs too declined over the previous quarter to 1.38 percent from 2.3 percent.

In August, Ujjivan Small Finance was given scheduled bank status by the Reserve Bank of India, allowing the lender to access institutional deposits and easier funding facilities. This enabled Ujjivan “raise funds at competitive rates” since then, said Sudha Suresh, MD and CEO at Ujjivan Financial Services.

We expect to leverage further on this and other optimal sources of funding in the next two quarters.
Sudha Suresh, MD & CEO, Ujjivan Financial Services

Ujjivan’s deposit base too was boosted by the scheduled bank status to Rs 1,349 crore from Rs 403.7 crore in the last quarter. This includes Rs 614.5 crore raised through certificate of deposits, the investor presentation said.

Shares of Ujjivan Financial Services Ltd. had closed trading flat on, ahead of the announcement, while the S&P BSE Sensex ended trade 0.08 percent lower.

Other Highlights

  • Gross loan book grew 2.8 percent over last year, and 3.3 percent over the previous quarter.
  • Loan disbursements were 10.5 percent lower than in the same quarter last year but 14.8 percent higher sequentially
  • Collection efficiency for new business, between January-September stood at 99.7 percent
  • It wrote off Rs 88.64 crore worth of NPAs during the quarter