Ujjivan Small Finance Bank Q1 FY27 Results: PAT at ₹317 Crore, Loan Book Grows 29%, Credit Cost Guidance Lowered

What Happened ?

Ujjivan Small Finance Bank reported another strong operating quarter driven by healthy loan growth, improving deposits and stable asset quality.

Management highlighted continued diversification away from microfinance through rapid expansion in affordable housing, MSME, gold loans, vehicle finance and micro mortgages. At the same time, the bank maintained healthy profitability despite a competitive funding environment. 

key details

Deposit Franchise Continues to Strengthen:

The liability franchise remained one of the strongest highlights of the quarter.

Key developments include:

• Deposit book crossed ₹48,000 crore.
• CASA deposits grew nearly 38% YoY.
• Highest annual deposit growth recorded in the past two years.
• Cost of funds declined to 6.86%.
• Liquidity Coverage Ratio remained strong at 132%.

Management stated that its focus remains on expanding CASA, affluent banking, salary accounts and NRI deposits while maintaining funding costs under control.

Secured Loan Portfolio Crosses 50%:

The bank continues to diversify its loan portfolio.

Highlights include:

• Secured loans now account for 50.4% of the overall loan book.
• Secured portfolio grew 42.7% YoY to ₹21,638 crore.
• Total loan book reached ₹42,903 crore.
• Quarterly disbursements increased 41.4% YoY to ₹9,245 crore.

Management reiterated its target of increasing secured lending to approximately 56% of the portfolio by March 2027. 

Strong Growth Across Retail Businesses:

Multiple lending segments delivered robust growth.

Affordable Housing:

• Loan book: ₹11,210 crore
• Growth: 40.8% YoY
• GNPA: 1.2%

MSME:

• Loan book: ₹3,470 crore
• Growth: 54% YoY
• New Book GNPA: 0.5%

Gold Loans:

• Loan book: ₹1,020 crore
• Growth: 248.6% YoY
• Disbursements: ₹467 crore
• Originated LTV: 75%

Vehicle Finance:

• Loan book: ₹1,036 crore
• Growth: 85.1% YoY
• GNPA: 1.7%

Asset Quality Continues to Improve:

Management highlighted sustained improvement in portfolio quality.

Key observations include:

• GNPA declined to 2.17%.
• Bucket-X collection efficiency remained around 99.7%.
• Credit costs were lower than management expectations.
• Provision Coverage Ratio improved to 85%.
• MFI repayment behaviour has stabilised across almost all states.

Management noted that industry guardrails and borrower deleveraging have significantly reduced stress within the microfinance portfolio. 

Guidance Revised Upward:

Following better-than-expected performance, management revised FY27 guidance.

Updated guidance includes:

• Credit cost reduced to 0.9–1.0% of average assets.
• ROA guidance increased to 1.8–2.0%.
• Operating expenses expected around 6.4% of average assets.
• Asset growth target maintained at approximately 25%.

Management attributed the improved outlook to lower slippages, healthy collection efficiency and disciplined cost management.

Digital & New Business Initiatives:

The bank continues expanding its product offerings.

Key initiatives include:

• Launch-ready digital unsecured Fast Track Loan.
• Pilot of pre-owned vehicle finance in Karnataka.
• Expansion into mid-corporate lending.
• Purchase Invoice Discounting introduced for MSMEs.
• Co-branded credit card currently under testing.
• Mutual fund investment available through digital banking channels.

Management also plans to activate gold loan services across nearly all eligible branches over time. 

Key Analyst Q&A Highlights:

During the earnings call, management shared several important insights:

• Affordable housing yields remain stable despite rising competition.
• Gold loan business continues to scale rapidly with significant branch expansion planned.
• No major increase in deposit costs is expected in the near term.
• Affordable housing growth remains distribution-driven.
• Microfinance portfolio has stabilised across most operating states.
• Gold loan is expected to become a major long-term growth engine.
• Around ₹250 crore of planned investments will be deployed for technology, branding, analytics and branch expansion during FY27.
• CASA growth is expected to remain strong throughout FY27.

Risk Analysis

Summary:

• While business fundamentals continue improving, investors should monitor funding costs, competitive pressure in secured lending and macroeconomic conditions affecting borrower repayment.

Key Risks:

• Rising competition in affordable housing and MSME lending.
• Deposit mobilisation pressure.
• Weather-related risks affecting rural borrowers.
• Margin pressure if funding costs increase.
• Execution risks from rapid branch expansion.

Worst Case:

• If funding costs rise materially or economic conditions weaken, profitability could come under pressure despite healthy loan growth.

Risk Level: Medium

Company Commentary

• Management stated that the bank remains focused on delivering profitable growth while strengthening its liability franchise, expanding secured lending and investing in digital capabilities.
• The leadership expressed confidence in achieving around 25% asset growth during FY27 while maintaining healthy profitability and improving asset quality.