Broker’s call: Ujjivan SFB (Buy)

Target: 42 rupees

CMP: INR 38.9

Ujjivan SFB hosted an Analyst Meetup recently, showcasing the business heads of the Assets, Liabilities, Credit & Collections and Technology sectors. Management has highlighted its plans to build a mass market bank with an eye on the ambitious middle class. It also outlined its drive to diversify further into the secured product segments with confidence in growth plans in the small banking business itself.

Underlying macroeconomic conditions remain favourable, which should help the bank report healthy rates of return.

Ujjivan SFB reported strong credit growth of 33 percent year-on-year in FY23, led by the small banking sector. Management has indicated that overall credit growth is likely to remain strong, with guidance of over 25 percent growth for fiscal year 24-26.

However, the secured segments should lead the growth, with a special focus on the affordable housing book. Management expects to increase the share of secured loans to approximately 40 percent by fiscal ’26. The bank will also focus on gold loans, two-wheel loans and Micro-LAP as it looks to serve the life-cycle needs of its customer base.

We hold the purchase at a fair value of Rs 42 (previously $36); Prefer Holdco over the bank (approximately 17 percent discount for Holdco).