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Ujjivan Financial Services
Third largest microfinance company
Promoted by Samit Ghosh, Ujjivan Financial Services, which started operations in 2005, is a Bengaluru-based microfinance company, providing a full range of financial services to the economically active poor not adequately served by financial institutions. The company has operations spread across 24 states through a network of 470 branches and 7,862 employees with over 2.77 million customers at end December 2015.

The company is the third largest microfinance company in India in terms of gross loan portfolio, with a market share of 11.2% at end September 2015.

Its business is primarily based on the joint liability group lending model for providing collateral free, small ticket-size loans to economically active women. The company also offers individual loans for housing related needs and to micro and small enterprises (MSEs). The company also provides non-credit offerings comprising life insurance products, in partnership with insurance providers such as Bajaj Allianz Life Insurance, Kotak Mahindra Life Insurance and HDFC Life Insurance.

The company is one among the 10 companies to have received in-principle approval from the Reserve Bank of India (RBI) for setting up a small finance bank (SFB). The regulation requires SFBs to reduce foreign share holding below 49%. The foreign share holding of the company at the timing of filing of its IPO draft proposal was at 90.57%, which has declined to 77% post pre-IPO placement. Post-IPO, the foreign shareholding is expected to fall to 44-45%. The company is planning soft launch of its SFB in Q4 of FY2017

Ujjivan Financial Services's outstanding loan portfolio had grown at a CAGR of 51% from Rs 625.15 crore as of 31 March 2011 to Rs 3274.14 crore as of 31 March 2015. Its outstanding loan portfolio as of 31 December 2015 was Rs 4589.38 crore, up 40% over March 2015. Group lending constituted 87.6% of total loan book, while individual loans share stood at 12.4% at end 31 December 2015.

The total debt of the company stood at Rs 3740.4 crore at end December 2015. Banks and financial institutions accounted for 82.5% of the total debt, while debentures and unsecured cash credit loans accounted for rest of the debt.

The gross assets under management (AUM) stood at Rs 4589 crore with a gross NPA ratio at mere of 0.15% at end December 2015. As of December 31, 2015, the capital adequacy ratio (CAR) stood at 19.64%, compared to the RBI-mandated CAR requirement of 15.00%. The Tier-I CAR was at 17.8% at end December 2015.

The company has maintained the GNPA as well as the NNPA ratios at negligible level. The GNPA as a percentage of AUM was 0.15%, while the NNPA stood at 0.04% at end December 2015.

The Offer and the Objects

The company is coming out with an IPO to collect around Rs 875 crore at the lower band of Rs 207 per share (face value Rs 10 per share) and Rs 882.5 crore at the upper band of Rs 210 per share consisting of a fresh issue of equity shares (1.71-1.73 crore share) aggregating to Rs 358.16 crore and offer for sale of 2.50 crore equity shares.

The company has raised Rs 291.83 crore in a pre-IPO placement round with institutional investors, selling over 1.42 crore shares at Rs Rs 205 per share. Accordingly, the size of the fresh issue as disclosed in the Draft Red Herring Prospectus dated 31 December 2015 being Rs 650 crore, has been reduced to Rs 358.16 crore.

The offer for sale includes sale of equity share of up to 3,495,626 equity shares by Elevar Equity Mauritius, up to 3,060,722 equity shares by International Finance Corporation, up to 1,754,386 equity shares by India Financial Inclusion Fund, up to 2,523,725 equity shares by Mauritius Unitus Corporation, up to 2,698,163 equity shares by Nederlandse Financierings-Maatschappij Voor On Twikkelings Landen N.V., up to 2,935,213 equity shares by Sarva Capital Llc, up to 3,093,869 equity shares by WCP Holdings III and up to 5,406,628 equity shares by Women's World Banking Capital Partners.

The issue is to be made through a book building process and will open on 28 April 2016 and will close on 02 May 2016.

The company proposes to utilize the proceeds of the fresh issue to augment the capital base to meet future capital requirements, which are expected to arise out of growth in the assets, primarily loans and advances and other investments.


The company is the third largest microfinance company with deeper penetration thorough strong branch network. The company has a strong customer base, with healthy retention ratio of 88% at end December 2015, improving from 73% in FY2010.

The company is managed by professionals having diversified track record in the financial services industry.

The decentralized regional management structure enables it to effectively manage pan-India presence through quick on-ground decision making.

The company has established strong risk management and audit framework to identify, assess, monitor and manage credit, market, liquidity and operational risks. The NPAs were at a negligible level end December 2015.

Digitized front end consists of android phones for group loans and tablets for individual loans, which enables the company to analyze the customer information, financial position and credit bureau details of a potential customer in real time. The paperless processing of applications and documents at branches has also enabled efficient and secure document management with low turnaround time.

The company has maintained strong growth credentials over the years through high rates of customer retention, geographical expansion, improvement in staff productivity, increase in the individual loan portfolio, lower credit cost and growth in customer base led by branch expansion.

Ujjivan Financial Services is among the ten winners of SFB license from the RBI. On the asset side, conversion to a small bank could help MFIs/HFCs to diversify their product mix, which is restricted at present.


The conversion to SFB poses challenges such as increase in overall funding requirement to meet CRR and SLR requirements. Further, access to institutional funding sources could be limited and regulatory restrictions on interbank lending could limit the funding availability from banks.

The negative carry-on CRR and SLR is likely to bring down the net interest margins of the SFB and higher operating expenses on account of introduction of new products, cost of deposit mobilization, recruitment and trainings, up-gradation of systems and branch infrastructure could lead to losses/single digit return on equity in initial years.

Regulations related to SFBs are still evolving.

The company does not have an operating history in the banking business and is subject to all of the business risks and uncertainties associated with setting up a new business in general, and banking operations in particular.

Market acceptance of the Ujjivan Financial Services brand is critical to banking business.

Loans to the underserved sections of the population involve relatively higher risk and high operational costs.


Ujjivan Financial Services's annualized EPS for the nine-month FY2016 on post-issue equity works out to Rs 13.89. At the price band of Rs 207 to Rs 210, P/E works out to 14.9 to 15.1 times.

The book value of Ujjivan Financial Services is Rs 99.7. Post-issue, the book value works out to Rs 128.26 at the issue price of 207 and Rs 128.51 at the issue price of Rs 210. P/BV at both the bands works out to 1.6 times.

Among the peers, the recently listed Equitas Holdings is trading at P/BV of 2.3 (Price: Rs 138, Consolidated BV: Rs 60). The average ROA of Equitas Holdings as on March 2015 stood higher at 2.96%, while the average ROA for Ujjivan as on March 2015 stood at 2.5%. The average loan book of Equitas as on December 2015 stood at Rs 5505 crore, whereas the loan book of Ujjivan stood at Rs 4589 crore as on December 2015. The net NPA of Equitas as on December 2015 stood at 0.97%, whereas that of Ujjivan stood at 0.04%. Equitas had higher branch network of 539 branches as on December 2015, while Ujjivan operates with 470 branches. Equitas is well diversified offering a range of financial products such as microfinance, vehicle finance, MSE finance and housing finance, whereas Ujjivan has 87.5% of loan book in the microfinance group lending segment.

Ujjivan Financial Services: Issue highlights

For Fresh Issue Offer size (in no of shares )
- On lower price band1.73 crore
- On upper price band1.71 crore
Offer size (in Rs crore )358.16
For Offer for Sale Offer size (in Rs crore)
- On lower price band516.84
- On upper price band524.33
Offer size (in no. of shares)2.50 crore
Price band (Rs)*207-210
Post issue capital (Rs crore)
- On upper price band103.23
- On lower price band103.43
Post-issue promoter & Group shareholding (%)0.0
Issue open date28/04/2016
Issue closed date02/05/2016
ListingBSE, NSE

Ujjivan Financial Services: Financials

Particulars1103 (12)1203 (12)1303 (12)1403 (12)1503 (12)1512 (09)
Income from Operations151.89148.24222.52347.89599.32713.20
Other Income4.558.0611.419.7712.5616.44
Total Income156.44156.30233.93357.66611.88729.64
Interest Expenses48.1360.9382.08139.85271.38305.56
Other Expenses83.9087.3694.73117.53198.20213.44
Gross Profit24.418.0257.13100.28142.30210.65
Provisions and Contingencies4.545.766.908.2921.0517.03
Profit before Tax 17.26-0.1547.7088.84114.51187.68
Provision for Tax5.57-0.2814.8330.4338.7365.38
Profit after Tax 11.690.1332.8758.4275.79122.31
* Annualised on post issue equity of Rs 117.42 crore, Face value Rs 10/- Figures in Rs crore Source: Capitaline Databases

 Ujjivan Financial Services: Track Record

201103 (12)201203 (12)201303 (12)201403 (12)201503 (12)201512 (09)
Gross AUM625.15703.421126.001617.273274.144589.38
Net AUM 625.15691.161126.001617.273218.694540.13
Securitized AUM0.0012.270.000.0055.4549.25
Net AUM Growth (%)68.61%10.56%62.91%43.63%99.02%54.74%
Average Net AUM 497.96658.15908.581371.632417.983879.41
Product wise Gross AUM
Group Lending--1079.981504.032931.304018.16
Individual Lending--46.02113.24342.84571.22
Disbursements 1141.451082.861540.922104.984328.424529.28
Disbursement Growth (%)# 84.34%-5.13%42.30%36.61%105.63%39.52%
Total Loan Accounts 23640138992741021818131130524171203130381
Interest Income132.67133.82206.64325.45550.83661.74
Other Income 23.7722.4827.2932.2161.0567.90
Total Income156.44156.30233.93357.66611.88729.64
Interest Expense47.3659.7281.65139.33269.89303.70
Net Interest Income85.3174.10124.99186.12280.94358.04
Total Expenses139.18156.45186.23268.82497.37541.96
Cost of Funds# 13.36%10.96%10.11%10.53%11.31%11.80%
Credit Cost4.545.766.908.2921.0517.03
Yield#(%) 26.64%20.33%22.74%23.73%22.78%22.74%
Spread#(%) 13.28%9.37%12.63%13.20%11.47%10.94%
Net Interest Margin#(%) 17.13%11.26%13.76%13.57%11.62%12.31%
Operating Expense/ Average Net AUM#(%)17.53%13.82%10.75%8.84%8.54%7.60%
Gross NPA 1.816.320.951.182.357.00
Gross NPA/Net AUM (%) 0.29%0.91%0.08%0.07%0.07%0.15%
Net NPAs 1.625.600.850.220.601.79
Net NPAs/Net AUM (%) 0.26%0.81%0.08%0.01%0.02%0.04%
Number of branches 351299301350423470
Number of employees 400934493656466770897862
Number of loan accounts 23640138992741021818131130524171203130381
Net Profit 11.690.1332.8758.4275.79122.31
Average Total Assets559.84802.991125.991717.783027.484364.68
Average Net Worth110.52177.88279.15345.24554.49797.73
Total Borrowings472.13617.24997.461649.963121.773740.40
Average Debt354.54544.69807.351323.712385.873431.08
Return on Average Assets (%) # 2.09%0.02%2.92%3.40%2.50%3.74%
Return on Average Net Worth (%)# 10.58%0.07%11.78%16.92%13.67%20.44%
Average Debt / Average Net Worth
Average Net Worth as a percentage of Average Total Assets 19.74%22.15%24.79%20.10%18.32%18.28%
Cost to Income ratio101.42%121.13%78.15%65.12%73.48%61.79%
Basic Earnings Per Share 3.360.035.338.9111.2414.2
Diluted Earnings Per Share3.090.034.978.3810.6213.37
Book Value Per Share30.5239.8145.4153.4381.7693.92
Capital Adequacy Ratio
Tier I Capital (as a Percentage of Total Risk Weighted Assets (%)) 17.47%32.41%27.03%21.81%21.70%17.80%
Tier II Capital (as a Percentage of Total Risk Weighted Assets (%)) --0.24%0.92%2.54%1.84%
Total Capital (as a Percentage of Total Risk Weighted Assets (%)) 17.47%32.41%27.27%22.73%24.24%19.64%
#Figures are Annualized
Source: Capitaline Databases

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