Ladies and gentlemen, good day and welcome to the Ujjivan Small Finance Bank Limited Q2 and H1 FY 2027 earnings conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star and zero on your touchtone phone. I now hand the conference over to Mr. Renish Bhuva from ICICI Securities Limited. Thank you, and over to you, sir.
Thank you, Ritija. Hi, good evening, everyone, and welcome to Ujjivan Small Finance Bank Q2 FY 2027 earnings call. On behalf of ICICI Securities, I would like to thank Ujjivan SFB management team for giving us the opportunity to host this call. Today, we have with us the entire top management team of Ujjivan, represented by Ms. Carol Furtado, Whole Time Director and Interim CEO, Mr. Balakrishna Kamath, CFO, Mr. Ashish Goel, Chief Credit Officer, Mr. Vibhas, Head Micro Banking, Mr. Hitendra Jha, Head Retail Liability TASC and Third-Party Product, Mr. Pradeep, Head Housing and Micro Mortgage, Mr. Martin, Chief Operating Officer, Mr. Brajesh Cherian, Chief Risk Officer, Mr. Siddharth, Head Investor Relations, and Mr. Gaurav Sah, Investor Relations. I will now hand over the call to Carol Ma'am for opening remarks, and then we'll open the floor for Q&A. Over to you, ma'am.
Thank you, Renish. Good evening, and thank you all for joining us to discuss Ujjivan Small Finance Bank's Q2 FY 2027 earnings call. Please note, I will be referring to year-on-year comparisons with Q2 FY 2026 and quarter-on-quarter with Q1 FY 2027. I would like to start with few important developments before delving into the quarter. Post our MD, Mr. Sanjeev Nautiyal's decision to take an early retirement due to health reasons, the NRC is actively engaged to ensure timely submission of the MD candidate to the regulator. Our growth in H1 FY 2027 has been built on strategic capacity creation and product evolution. This is matched with pristine asset quality outcomes. We remain well-positioned with regards to people, technology, systems, and risk management to continue this growth momentum.
Within the shareholders' approved resolution at the AGM, we propose to raise equity capital of INR 409 crore from QIBs by issuing shares on a preferential basis to marquee investors, International Finance Corporation, Bajaj Life Insurance, HDFC Life Insurance, and Aditya Birla Sun Life Insurance, subject to shareholder approval. Holding the RWA constant at September 26th, the proposed capital raise would increase CRAR by approximately 1.2% from 20.69% on a pro forma basis. Since fundraise is being done at a premium to current BVPS, it will lead to accretion of INR 0.8 per share as of September 26th. We remain nimble to the evolving needs of the bank. Thus, as shared, we have enhanced our funding mix by increasing the securitization pool by INR 500 crore in October month. This will be NIM accretive and P&L neutral. Now, coming to the operating environment.
India's GDP, gross capital formation, and high-frequency indicators remain healthy and appear resilient to external shocks. Renewed conflict in the Middle East and increased volatility in global energy and freight prices are adding to inflationary pressures. In its latest MPC statement, the RBI raised its FY 2027 GDP growth forecast to 7.1%, while the committee increased the repo rate by 25 basis points and shifted to calibrated tightening. A deficient southwest monsoon and strong El Niño conditions pose risks to rural demand, while urban demand remains stable. Q2 of FY 2027 has demonstrated another quarter of strong growth anchored on well-rounded credit growth and stable margins. Along guided lines, in H1 of FY 2027, we have strengthened our distribution by adding 104 branches and 1,335 employees. We launched a well-curated brand campaign in September 2026 with a new brand ambassador, Padma Shri awardee, Mr. R. Madhavan.
Ujjivan today has evolved significantly in terms of its scale, reach, and breadth of offerings. The tagline, "Nothing small about us", reflects the scale of Ujjivan's aspirations, reach, and the breadth of financial solutions it offers. This campaign will be run across TV, print, and digital and is expected to reach around 35 crore viewers. Other institutional building spends on digital and technology have been set in motion and will reflect in H2. This quarter marked an important milestone as we crossed INR 50,000 crore in deposits. Total deposits increased to INR 50,643 crore, up 29.2% year-on-year, with CASA at 26%. We continue to add customers and increase volumes across our various deposit offerings. We benefited from the downward repricing of deposits, which helped maintain the cost of funds at around 6.9%.
Although no rate hikes were taken in Q2, the increase effective in Q1 would now start showing, and we expect the cost of funds to start moving upwards. In line with our strategy to expand services for depositors, we launched the ASBA facility in Q2. Going forward, we will focus on simplifying transactions, increasing awareness and adoption of newly introduced services, and deepening engagement with customers. The gross loan book clocked robust growth and reached INR 45,699 crore, up 32.1% year-on-year. This translates to 12.4% YTD growth and are on track to meet the full year guidance. The secured business lines continue to grow faster and now form 52.1% of the loan book. The unsecured piece, consisting of micro banking, delivered healthy growth, reaching INR 22,037 crore.
This portfolio has grown approximately 6% in the first half of FY 2027 and remains on track to deliver around 12%-14% for the full year. Some key callouts for the quarter in micro banking. Collection efficiency remains strong with Bucket X collection efficiency at 99.7%, in line with Q1 outcome. New customer acquisition increased sequentially with an addition of 2 lakh customers in Q2. Despite usual weather disruptions in July, August, September, we have delivered on healthy disbursements and collections. Going ahead, our endeavor is to make newly added branches come up the productivity curve. Our housing business is a key vertical for the bank that caters to the aspirations of our customer base. Affordable housing and micro mortgages combined crossed INR 12,000 crore, up 38.1% year-on-year. This quarter, the affordable housing crossed an important milestone by crossing INR 10,000 crore mark and reached INR 10,056 crore.
Portfolio quality remains stable with PAR and GNPA at 3.7% and 1.2% respectively. The balance transfer out for Q2 was flat sequentially at 4.3%. We are targeting to preserve yields and are comfortable with the current growth levels. Micro mortgages growth remains strong. Loan book crossed INR 2,000 crore, reaching INR 2,031 crore, up 85.7% year-on-year. Portfolio quality continues to season at a comfortable pace, with GNPA at 0.7%. The MSME business, built upon the capacities created and product changes, grew to INR 3,871 crore, up 51.3% year-on-year. The new book reached INR 3,000 crore plus while maintaining GNPA of 0.5%. Gold loan continues to witness larger industry-wide tailwinds and grew to INR 1,275 crore, up 209.8% year-on-year. In H1, we have added 117 branches and plan to expand to a similar number of branches in H2. The disbursement LTVs are maintained below 78%.
Agri banking grew to INR 914 crore, up 79.2% year-on-year. As part of strategy, we operate in select locations with due importance to environmental factors. Portfolio in Karnataka is INR 165 crore. Out of this, INR 1.2 crore is eligible under the relief scheme and direct agri exposure in Maharashtra is nil. Two-wheeler loans grew to INR 1,081 crore, up 64.8% year-on-year. We are geared up for the festive season and expect enhanced business momentum. The asset quality performance, as measured across parameters, remains steady. The slippage ratio is at 1.6% of average gross loan book, while the credit cost came in at 0.7% of ATA. PCR continued to remain stable at 85% level. GNPA and NNPA remained healthy at 2.1% and 0.3% respectively. Total write-off for the quarter was at INR 59 crore. Financial performance.
Robust asset growth translated into strong revenue momentum, with total income reaching INR 2,450 crore and NII rising 35% year-on-year to INR 1,244 crore. Advances yield continues to be in comfortable zone and cost of funds remained largely stable, leading to net interest margin at 8.4%. Other income for the quarter increased at a healthy 17% sequentially. Operating expenses increased by 6% quarter- on- quarter, wherein employee expenses increased by 3% quarter- on- quarter and other OpEx by 10%. The increased OpEx was on account of planned investments in a comprehensive brand campaign and ongoing branch network expansion. This has resulted in an all-time high quarterly profit after tax of INR 365 crore, with ROA of 2.4% and ROE of 19.7%. We are taking steps to optimize capital consumption and have seen CRAR improvement by 33 basis points to 20.69% as of September 26th.
This is largely one time and we would resume consumption in a normalized run rate going forward. H2 outlook and guidance. Strong advance growth in H1 will support interest and related income growth run rate. However, the change in policy rates and resultant pass-through will lead to higher interest expenses than planned. While OpEx towards institutional build-out will accelerate, we anticipate a slower pace as planned. Asset quality outcomes are also expected to be along delivered lines. Considering these outcomes, we could overshoot our guided ROA range. We remain vigilant of revised monetary stance, risk of global rates and supply chain disruptions, coupled with weather-induced issues. Our high-frequency indicators across products for October remain in line with recent outcomes. IRDAI's notification is a consultation paper and we await the final guidelines on the matter. We remain engaged with our insurance partners as well as through IBA channels.
Since discussions with IRDAI are ongoing and submissions are due on October 25th, it would be premature to elaborate further. However, we are closely watching the developments. Lastly, I would like to say that at Ujjivan, our strategic focus continues to be on diversified advances growth with shift towards secured assets while we build the bank to provide Indians with the access to their financial aspirations. With that, I conclude my opening remarks and request the moderator to open the floor for questions. Thank you.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets and also to limit your questions to two per participant while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Shreepal Doshi from Equirus Securities. Please go ahead.
Hello, ma'am. Good evening, and thank you for giving me the opportunity, and congrats on a good quarter. My first question was related to margins. This quarter we have seen margin moderation of 10 basis points. Incrementally, we are looking at a much steeper rate upcycle and with our aspiration to continue to focus on secure portfolio on the asset side, how do you see margin moving in the second half of the financial year and also in FY 2028 from here on?
Hi, Shreepal. The margin for-
Yes.
Q2 was at 8.45 and as you rightly mentioned, repo rate has gone up by 25 basis points. That will have an impact of around 10 basis points on the margin. We feel the margin could come down to around 8.35% for the second half of the year. Coming to the mix change, yes, whatever is the impact will be set off by planned DA, which we are planning. Overall, the impact will be restricted to 10 basis points, which will be resulting in a NIM of 8.35%.
All right. Okay, got it. The second question was on the PAR 0 increase in group loans as well as in micro mortgages and also in some of our key states like Karnataka and Maharashtra, there is drought-like situation which has been announced. How do you see that impacting us as we speak in terms of collections, as well as could it have any deviation in our credit cost guidance for full year?
Shreepal, on group loans and individual loans, PAR increase
Is flat. You can see some basis points here and there. But by and large, since the bucket X collection efficiency has stayed steady at 99.7%, the PAR increase would be some decimal points, not more than that. Would it have any impact on the credit cost? Credit cost comes with a six-month kind of a lag. Credit cost will remain within our guided range.
And the-
On micro mortgages. Yes, you also spoke about micro mortgages. Micro mortgages is a business which is about 30 months old. A little bit of increase in PAR is expected. This is a business where the seasoning is currently happening. Yes, there will be a marginal increase in PAR. Currently, we are at about 1.8%. We can expect this to stabilize in the range of maybe 2.5%, just below 3%.
Got it. Just some qualitative color on our exposure, as well as impacting in states like Karnataka and Maharashtra because of the drought.
Yeah. Hi, Shreepal. This is Vibhas. As far as Karnataka and Maharashtra is concerned, these remain in our key watch list following the recent government and SLBC drought announcement, which could affect collection to some extent, mainly because government interventions. However, the guidelines primarily apply to pure agri portfolio, while our exposure is largely to allied agriculture activity. More than 60% of MB borrowers, microfinance borrowers, also have at least two source of income in their family. As far as Karnataka alone is concerned, about 80% of microfinance branches are in metro urban locations, mainly because we were an urban microfinance company. Exposure to North Karnataka also remains limited, and we have proactively moderated business there through our branch expansion and risk management strategy. Agri and allied activities represent approximately 20%-25% of portfolio. We have total INR 2,400 crore in Karnataka.
Out of that, 20%-25% portfolio is agri and allied, and these customers also have multiple source of income. Now, coming to the customers who are included as per the SLBC document. Out of INR 2,400 crore in Karnataka, only INR 15.1 crore is eligible as per the SLBC notice, and we are in touch with this customer to understand their requirement. Maharashtra, approximately 97% of our branches operate in metro and urban markets. Exposure to drought-affected areas like Vidarbha, Marathwada, or coastal Maharashtra, we have very shallow presence there, reflecting our discipline, branch expansion, and risk management strategy. Agri and allied activity account only for 1% in Maharashtra. There, the entire Maharashtra microfinance portfolio is INR 1,682 crore. Out of that, agri-related loans which qualifies as per SLBC is only INR 18 crore. It is less than 1%. That's how we are looking at it.
But at the same time, we remain cautious, prioritizing portfolio quality, collections, and calibrated growth. In drought-affected areas, we have strengthened credit assessment and customer engagement while following all MFIN and local administration and collection guidelines. This is how we are looking at these states. Also we are very closely looking at other states also where it might come up and we have to deal with that as well. But overall, we feel that it is something which can be managed.
While it can be managed on the asset quality side, as you are saying, in terms of exposure, can it also lead to some slowdown in business momentum for the sector at large and for ourselves as well?
For the sector, it may happen especially for the organizers who have very large presence in a particular state, which is under this drought-affected thing, like Karnataka and Maharashtra. But as a strategy, we don't have more than 15% portfolio in any of the states, and we always have a space to grow somewhere else if there is some problem. This we have done in the past also. As far as overall growth is concerned, our guidance on microfinance growth remains intact for the financial year.
Which will be said at what percentage, if you could repeat?
It should be somewhere between 12%-14%, in between 12%-14%.
This is for the GL, right?
It is for entire micro banking, GL plus IL.
Got it. Thank you so much for answering my questions. I will come in with you for more questions. Thank you and good luck for the next quarter.
Thank you.
Thank you.
Thank you. The next question is from the line of Shailesh Kanani from Asian Market Securities. Please go ahead.
Yeah. Good evening, everyone. First question is on miscellaneous income. That line item has seen a decent enough of growth in last few quarters, right? It is predominantly a representation of AMC charges, penal charges. Just wanted to understand the sustainability of this growth number, because it is the second-largest item in terms of non-interest income. What should we kind of mark it to? Is it related to disbursement or the balance sheet growth? If you can some throw light on that.
You are referring to miscellaneous income line? Yes.
Yeah.
It will grow in line with where the business is growing. As the deposits grow and the business grow, it will move in the same line going forward also.
The source seems to be late payment, penal charges, card charges. Hence, I was little curious on the growth number. The growth is very robust. INR 86 crore for this quarter.
It's a continuous process. This is a trend we have seen in the last few years. It moves in line with the business.
Yeah.
Yeah.
Okay, fair enough. My second question was with respect to affordable housing. We have seen a very robust growth trend over there, and similarly, there has been an uptick in terms of disbursement ATS as well over here. What number we are comfortable in terms of yields, in terms of asset quality, and we are at decent size in terms of book as well now, right? How long we can kind of expect this growth momentum to continue?
Hi, Shailesh. Pradeep here. See the growth, whatever we are actually doing from last six, seven quarters, I think that momentum should continue. Even in the Q1, Q2, it's in the range of 37%-38% on OSP. And we have actually not taken around 35% growth in our plan as well. That should continue. The reason behind, we are well-diversed across the states. We are active in 23 states in affordable housing and micro mortgages there in around 17 states. One of the best portfolio quality we have ensured with 1.2% NPA as of now. And with the present collection strategy, whatever we have kept on, I think I don't see any challenges in the growth as well as from the credit cost side. On the ticket size, in affordable, we are at INR 17 lakhs.
In micro mortgages, we have decided to de-focus on less than INR 5 lakhs, and the focus has been shifted in INR 5 lakhs-INR 15 lakhs. So our ticket size actually shifted from INR 7 lakhs to INR 7.8 lakhs as of now. In the year, the remaining quarter, it will actually stabilize around INR 8 lakhs.
And affordable, what would be a sweet spot over there in terms of ticket size?
Yeah, we are targeting 17 lakhs. That should remain the same as we don't want to actually further bring down our yield. So to maintain that, we will be there only.
Okay. This is predominantly the current number what we are. So, okay.
Yes.
Fair enough. Thanks a lot. I'll come back to you for further questions. Thank you.
Thank you. Next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Hi, sir. Good evening, and thank you for the opportunity. Sir, first question as a follow-up on the previous participant's thing on the drought situation in some of the states because of the lack of rainfall, et cetera. I got all the numbers. But on the ground level, are we seeing any changes in the behavior of the borrowers or in terms of how we are able to collect as opposed to September, have we seen any changes happening because of the announcement as well as the situation?
Yeah. Hi, Sarvesh. Last month, in the month of September, we didn't face any issue. Our collection percentage remained in the range of around 99.7%. In this month till today, we have not heard anything. As I mentioned, we are also in touch with the customer to understand their requirement, who are eligible as per the SLBC guideline. So far, majority of customers are not in favor of availing the facility as they can repay. This mainly originates from the fact that in our agri portfolio, 100% customers have more than one source of income. In micro banking portfolio also, more than 60% customers have more than one source of income, and agri is not the only source of income for them.
As far as overall impact is concerned, as you mentioned about Karnataka and Maharashtra, in other states also, so far we have not faced any kind of issue in the collections.
Okay. And sir, as a follow-up to that, we saw the leader also growing at just 3% on the micro banking book. In your book also, if I look at GL alone would be very small number, and GL plus IL is also lower than the year's guidance also. If we are seeing a good sort of an environment, do we want to step up the pedal in terms of the disbursement because the industry is also shrunken in size and the opportunities, demand will still be there, I guess, for the players who are still strong, like Ujjivan. How do you see that?
In the first half of the financial year, we have been able to grow about 6.5%, and in the remaining part of the financial year, overall our guidance is 12%-14%. From growth point of view, this is the sweet spot where we want to be as far as micro banking at Ujjivan is concerned. Whether we can grow faster, whether we can disburse more in the financial year is something which is very well calibrated in Ujjivan strategy going forward. How do we want to look at this year and next four years as well? As far as overall our growth is concerned, from where it is coming so far, a good part of our growth is coming from new customer acquisition. You are right, the demand has increased especially from the last quarter of the last financial year.
Among repeat also, we are seeing a good demand. But at the same time, as I mentioned, in some of the states, we need to be cautious, careful, and carefully choose location where we want to disburse loans in this financial year. Considering all these facts, we are very comfortable to grow at the rate of somewhere between 12%-14%.
And sir, my final question is on the insurance income. We have gotten around INR 90 crore in the first half. How much of this is linked to credit life for our loans and I think this is What is the typical commission rates that we have gotten here and what are the expenses against this income that we typically incur in our other expenses?
Hi, Sarvesh. Hitendra here. Roughly 50% income comes through the credit life. This has been trade for last so many years. As of now, it is very difficult to comment how much will drop because rates will drop, and nobody is very sure about what will be the real drop in income. It is right now the consultation paper has been released, and we are giving our feedback through IBA and also Association of Small Finance Banks of India. As of now, it is very early to comment what will real drop, but we are closely watching the situation. In case it happens, we have some other way to raise the income.
What is the expense, sir, that we do? Do we pass on some incentive or this is basically flowing to our bottom line?
No, it largely flows to our bottom line.
Okay. Understood, sir. Thank you and all the best, and congratulations on a great quarter.
Thank you.
Thank you. The next question is from the line of Rajiv Mehta from YES Securities. Please go ahead.
Yeah. Hi, good evening. Congratulations on very strong performance. So firstly on capital and liabilities growth. So on capital, we are doing a pref allotment of INR 400 odd crore. Then is there any timeline for the remaining capital raise? How are we thinking about the pending capital raise because the overall resolution for a much larger capital to be raised. Any thoughts about the pending of the remaining capital raise, given the fact that we are growing at a much faster than guided rate? On the deposit side, how do we plan to mobilize or accelerate deposit mobilization? I think ma'am spoke about likely witnessing an uptick in funding costs in Q3.
Would that be a function of just churn in the deposits, or would it also be a function of any planned rate actions that we might want to take on CI and retail term deposits for stronger mobilization of it so as to match the asset group?
Hi, Rajiv. Balakrishna here. First coming to the fundraise part. You are aware we have approval for up to INR 2,000 crore for the fundraise, out of which INR 409 crore we have got the approval today, and we will be going ahead with it. Now, as far as the balance is concerned, the resolution is valid up to July 2027. Looking at the favorable time, yes, we want to raise that within that time. That is the plan. Coming to the cost of fund, I will answer that. Around 10 basis points there is an impact due to the 25 basis points what has gone up in the repo. The details I will pass on to Hitendra. Hitendra, you can take it.
Hi, Rajiv. Hitendra here. If you look at overall deposit growth has been very good this quarter. We have grown almost 29%. CASA growth has slightly moderated, but our strategy remains the same. We have a segmental approach. We are focusing on HNI, we are focusing NRI, corporate salary, and we also market approach, like we are focusing top 80, top 30 cities, where our growth is almost double. We are growing at almost 40% CASA growth in these two markets. We will remain focused. We had some outflow from existing customer, some were deliberate, some were not that deliberate, but I do not see the systematic issue. We can arrest it very quickly. We remain committed to our growth projection, what we have given earlier.
No. For the second half, I think Kamath, sir, said that by 10 basis point the cost of fund-
Yeah
will increase in Q3, and then it will keep on increasing, right, as the deposits churn. Are you planning some rate actions on CI and on retail term deposit side-
Yes
which will also lead to incremental deposit cost increasing further?
This 10 basis point guidance is based on that only. We have a calibrated rate revision we will do as we go along. As of now, we have not done anything. Okay? But yeah, as we go along, we may do some changes in retail TD rate or CI rate.
Just understanding on the OpEx side. The brand campaign was launched in September. So I believe the billing and the cost will come from September onwards, maybe. And the branch addition also picked up off late. And there were also some planned tech investment. I think initially when you gave the first quarter guidance, we were thinking about spending roughly all put together INR 250 crore odd in the current year. So by how much are we likely to undershoot that figure in the current year? Maybe the remaining will spill over in the next year, but out of INR 250 crore, how much is coming in the current year as per the current budget? And second is on the credit cost. When I look at the first half number, we are at 80 basis point, first and second quarter average.
You are still guiding for 90 basis points- 100 basis points. At the same time we are saying that MFI, we are not seeing any risk built up, and we are moving more secured also, wherein within secured products also, we are not seeing any kind of a risk built up. So, this extra credit cost as per the current run rate, is it something that could it be because of some provision that you may want to take as a buffer in the second half?
Hi, Rajiv. Siddharth here. Before we take up the first three questions of yours, just want to reiterate that Carol Ma'am has stated on the call that the run rate of credit cost is going to be in line with the first half. We are not looking at credit cost increasing from where it is currently. I will now just pass it on to Balakrishna Sir to take on the first two questions.
Now, coming to the OpEx, I think we had given an indication last time that it will be around OpEx to ATA ratio 6.4. Now, considering the way it is moving, we feel it may end up at 6.2. So there could be a saving of 0.2 OpEx to ATA ratio. I think that answers your question. Yes, part of the amount was spent on the brand, but there is going to be a spillover to Q3, so the entire bill has not come in Q2.
Got it.
Yeah.
Yeah. Thank you. Thanks a lot.
Thank you. The next question is from the line of Ashlesh Sonje from Kotak Securities. Please go ahead.
Hi, team. Good evening. A few questions from my side. Firstly, how are you thinking about funding your growth aspiration now, especially given that the CASA mix and the bulk TD mix seems to be moving unfavorably as of now? That is one. Secondly, on the insurance commission norms, I understand it is still quite premature, but just wanted to check very qualitatively if that can potentially change your branch profitability math, and hence your branch expansion plans. And just one data keeping question. If you can share the MFI slippages for the quarter.
Hi, Ashlesh. Hitendra here. As I said earlier, CASA, if you look at overall deposit growth is very healthy. We are growing very well. Yes, we had some pressure on CASA, but I do not believe it is any systematic issue here. We have seen some outflow in certain accounts, which is of temporary nature. But what I want to highlight, that we are acquiring more customers now. If you look at our year-on-year basis, our new NTB has gone up by 34%. Plus, we are also acquiring a segmented-focused customer like HNI, NRI, TASC customers. So these customers typically give you higher value. We do not foresee any stress on CASA going forward. And we remain committed. Whatever we have given guidance, we will be able to deliver that kind of number as we go along from here.
Okay. Sorry, just to clarify, sir, you mean you can reach again to that 30% CASA ratio by the end of the year? Is that-
No, 30% will be difficult. I don't want to give any number, but yeah, it will slightly lower. Let's say 2% lower than that.
Understood. Okay.
Ashlesh, on your slippages question for microfinance, it was 1.85% for the full year.
Sorry, sir. You mean 1.85%?
1.85% slippages for the full year.
For the first half.
For the first half, annualized. Yeah.
Okay. Understood.
Ashlesh, sorry, I missed your TPP question. If you look at TPP quarter two performance, quarter-on-quarter , we have grown by 41%, and year-on-year is 30%. Performance is in line with our budgeting. We are very confident we are able to deliver the number. As I say, IRDAI guideline is a draft right now. We do not immediately see this come in Q4. If it comes in Q4, yes, this will be some stress. Otherwise, we are able to deliver our committed number.
Understood, sir. Sir, if I can squeeze in one more. Do you think you are in a position now, or you feel confident now that you can revise your ROA guidance upward for the full year?
Ashlesh, hi. Siddharth here. I think we have been fairly clear in the opening comments that the likelihood of an overshooting on the upper end is visible. We have given the moving pieces, which are working favorably for us. You would have also noted the CFO mentioning that the OpEx to ATA is looking 20 basis points lower than what we had indicated at the start of the year, which was 6.4. Summing up, it looks like a high probability of a significant beat on the upper end at our ROA.
Understood, sir. Thank you, sir. Those are all the questions I have.
Thank you.
Thank you. The next question is from the line of Sagar Shah from Spark PWM. Please go ahead.
Yes. First of all, congratulations to the management for excellent set of earnings. My first question was related to our non-micro banking portfolio. The non-micro banking portfolio now constitutes around 50%. I am not talking of secured to unsecured, but I am talking of micro banking to non-micro banking. So what is our target for FY 2027 and FY 2028? How much are we targeting? What would be the ratio approximately between the micro banking and non-micro banking actually? That is my first question.
Yeah, we already mentioned earlier, minimum we will try 56% as the secured percentage. Every year, we have said we will improve it by 5%. That is all.
Yeah, got it.
Coming to micro banking and non-micro banking that you are talking about.
Correct
We know that the customers whose family level income is more than INR 3 lakhs is categorized under non-micro banking. We are seeing that, especially in NCA that we are doing today, we also strategically looking at customers where the family level income is higher. You may expect 3% or 4% higher number as we end the financial year from now.
Okay. The non-micro banking that you are talking about.
Yeah, that's what he meant. Today it is at 52%. He expects it to reach 56% by end of the year. Going forward, every year, 5% improvement.
Okay, sure, sir. My second question was related to our MSME disbursement actually. The MSME disbursements were quite robust in this quarter, 44% YOY growth, and especially that was led by the working capital finance. My point was, and my question was that, in which geographies actually are we getting this MSME growth actually? Is it in the western region or is it in the southern region? I wanted to understand the management's philosophy on this disbursement on this segment, actually.
Top 50 cities in south, north, west. This is how we are positioning. We are in 50 cities, the top 50 cities. South is our biggest region, followed by north, west, and east.
Okay. Fine, sir. I got your point. Thank you. All the best for future. Thank you.
Thank you. The next question is from the line of Mahesh Kabra from BSK Group. Please go ahead.
Good evening, sir, and congratulations on the good set of number. The question is around fundraising. We had guided for the INR 2,000 crore fundraise, and we have raised INR 400 crore right now. What is the future plans for further fundraising?
Just now we have mentioned in an earlier question, INR 409 crore already the board approved today through the preferential offer, which we already informed you. The balance amount, the resolution which was approved is valid up to July 2027. We are planning to raise the balance for the resolution expense. That's the plan.
Okay. This INR 409 crore would roughly save around INR 330 crore annualized interest cost as well, right?
Could you please repeat that?
I said, the INR 400 crore rupees that we have raised through preferential allotment will save us around INR 30 crore rupees of annualized interest cost as well, right? Interest cost saving due to fundraise.
Yes. You are right. More or less that.
Yes, sir. Okay. Thank you.
Thank you. Participants who wish to ask a question, please press star and one . The next question is from the line of Sonal from Prescient Capital Investment Advisors. Please go ahead.
Hi there, this is Sonal Minhas from Prescient Capital. I hope I am audible.
Yes, you are.
Sure, good. I have just one question. I am looking at the chart on slide number 15, the PAR trend for group loans. I see all the PAR values inching up a little. You have given guidance on credit cost. Just wanted to understand, is there a higher slippage number we expect going forward in Q3 and Q4, given these numbers are inching up a little?
No, Sonal, the numbers are not significant. As we said, the credit cost, the bucket X collection efficiency is very steady at 99.72%.
Okay.
Therefore, any PAR that you see increase is in decimal places, and it will not have any meaningful impact on the credit cost. As we said, credit cost in H2 is similar to the credit cost in H1.
All right. Thank you. That is all, sir. Thank you.
Thank you. The next question is from the line of Divyansh Aggarwal from Ionica Wealth Managers. Please go ahead. Mr. Divyansh, please go ahead with the question. Your line is unmuted. Mr. Divyansh Aggarwal, we would request you to kindly unmute yourself and proceed ahead with your questions. As there is no response, we will move to the next question, which is from the line of Shubham Pankaj Karwande from JM Financial Limited. Please go ahead.
Hello. Hi, sir. Hi, ma'am. Thank you for the opportunity. I have two questions. The first question is on the MD search. Where is the search right now? Has a name been submitted to RBI? Are you looking internally or outside? Realistically, when do you expect an approval and a new MD in the chair?
So, as was conveyed by the Chairman in the last call, the NRC has been mandated to search for a successor for our current MD and is currently working on it. We hope to complete the process in around three to four months, starting September 1st. We should be able to complete it in three to four months.
Okay. Thank you. The second question is on the yields part. The yields were up 28 basis points quarter-on-quarter, even though the secured mix is moving up. With products like MSME and FIG also, which give only around 10.5% yield, are sitting at a total of 30% of disbursements. So what drove this yield increase, and can it continue in the future? As you go from 52%- 56% secured target by March, what NIM impacts are you targeting internally apart from the 10 basis points impact from the rate hike, which you already mentioned?
Shubham, I just want to correct you. Our book yield has dropped by 10 basis points sequentially. I am disconnected on your question as to what you are quoting it from.
Okay.
But as we speak right now, we have maintained our spectrum of products, gives us the flexibility to kind of push through the higher-yielding products as long as we find them conducive. Likewise, we have taken the pricing change that we wanted to in MSME, and we are retaining a similar yield profile for the last two quarters. We will continue to grow MSME at the prevailing yield that we've already delivered for H1. So I don't see any meaningful change in our product yield at this point in time. And the normal book shift should give you the mathematical number, which we will move towards.
Okay. Thank you. I was calculating on the overall interest earning assets where I could see your increase. But all right, I got the answer. Thank you so much.
Thank you.
Thank you. The next question is from the line of Somil Shah from Paras Investments. Please go ahead.
Yeah, hi. Thanks for the opportunity. Sir, I wanted to know, there has been talks over MDR on UPI payments. How do we see this benefiting our bank? I would like to hear your views on the same.
Hi, Somil. Yes, if it is implemented, it will benefit us. As of now, it has been deferred post-Diwali. Let's wait when it comes. Yes, if it goes through, it will benefit us.
Okay. There might be some FD which will be renewed via UPI or maybe some loan installments paid by UPI. Net, it will not increase our expenses, right? Our income is going to increase through UPI or MDR.
No, we are not expecting any increase in expense. Okay. However, there will be some upside on income. Our infrastructure is already there, so I do not need to create any separate, fresh infrastructure for that.
Okay. And sir, our PAR 0 number for last three quarters is close to 3.6%. Looking at the current market dynamics, where do we see this number settling by end of this year?
It will remain largely steady with some decimal points here or there. See, all our bucket efficiencies in micro banking as well as on the secured assets is going very steady. The PAR numbers are not likely to change from where they are.
Okay. So we are not seeing material difference due to the drought issues in the few states.
As Vibhas had previously responded, the exposure is quite limited.
Okay. That is it from my side. Thank you, and all the best.
Thank you. The next question is from the line of Pritesh Bumb from Elara Capital. Please go ahead.
Hi. Good evening, team. Just a couple of questions. One is on individual loans. I see the ticket size is up this quarter. Anything to read into that or anything there?
No, nothing. This small change up and down will happen. It depends upon how much you do and how you do business every month. More repeat, more fresh, more NCA. Slight change in number will happen.
At what ticket size we will be comfortable generally? We could move up beyond INR 1.5 lakh or so, right?
Yes, we are comfortable there. Around INR 1.5 lakh is something we are looking at in individual loans.
Fair enough. Second question was on this non-microfinance. My basic assumption there is that it is mostly a consumption loan and that share is moving up. How is the strategy there and how are we assessing that in terms of disbursement and overall look?
It is not a consumption loan. Both micro banking and non-micro banking, about 97% of our loans are income-generating loans. The only difference is that in non-micro banking, the family level income is on the higher side. That is the only difference.
But the end use is not consumption, is it? Both are income-generating.
Yes. We have overall, in both of the categories, about 3% loan which goes into consumption, remaining is income-generating.
Okay. Sorry, I will understand this offline. Yeah, thanks for that. Lastly, in terms of the PAR book in the micro banking which is there, do you see any scope for it to now go further down from here on?
No, Pritesh, it is very steady. In fact, the PAR was declining post the issue that we had seen last year. But now the collection efficiencies are very stable. The PAR book, even if it changes, will be in decimal points only.
Any reason for that? I mean, just trying to understand. I understand the collection efficiency is now very good. But why will the PAR remain where it is, if not go down or go up also, in the sense that the environment is still tough, but then there are geographies which are also improving. Any reason there?
So, you may remember we had red, amber, green. Most of our branches now in green. They are 99.7% and above. The averages are also roughly the same. There are a few branches which are at 99.6% and below. We don't expect that number to increase. The efficiency will largely remain in the range where it is.
Sure. Got that. Okay. Thank you so much, and all the best.
Thank you, Pritesh.
Thank you.
And we will connect to you offline.
Yeah.
Thank you. Ladies and gentlemen, that will be the last question for today, which is from the line of Sagar Shah from Spark PWM. Please go ahead.
Yeah. First of all, thank you again for the opportunity. I just had one follow-up question related to borrowings, actually. We have repaid around INR 800 crore in this quarter worth of borrowings. So just wanted to have a number, a quantitative number that what percentage or what level of borrowings will we end in this financial year as part of our liabilities?
Are you talking about the balance sheet borrowings number?
Yes, correct.
I think we'll have to check this. We'll come back to you on this.
Okay, sure. No problem. I'll connect offline.
Thank you.
Thank you. Ladies and gentlemen, as that was the last question for today, with that, I now hand the conference over to management for closing comments.
I once again thank all the participants for their time and interest, and wish you and your families happy Dasara and a joyous festive season ahead. We at Ujjivan Small Finance Bank remain focused on delivering on profitable growth while we build an enduring institution. Please reach out to our IR team for any queries that you may have. Thank you.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.