RESULTS REVIEW 1QFY17

2 AUG 2016

Ujjivan Financial Services

NEUTRAL
INDUSTRY
CMP (as on 2 Aug 2016)
Target Price

BANKS
Rs 486
Rs 510

Nifty

8,623

Sensex

27,982

KEY STOCK DATA

Bloomberg

UJJIVAN IN

No. of Shares (mn)

118

MCap (Rs bn) / ($ mn)

57/861

6m avg traded value (Rs mn)

STOCK PERFORMANCE (%)

52 Week high / low

Rs 548/217

3M

6M

12M

Absolute (%)

Relative (%)

SHAREHOLDING PATTERN (%)

Promoters

FIs & Local MFs

18.86

FIIs

52.18

Public & Others

28.96

Source : BSE

Parul Gulati
parul.gulati@hdfcsec.com
+91-22-6639-3035
Darpin Shah
darpin.shah@hdfcsec.com
+91-22-6171-7328
Siji Philip
siji.philip@hdfcsec.com
+91-22-6171-7324

Cruising strong!
UJJIVAN reported strong operating performance led
by robust AUM growth (66.5% YoY) amidst fairly
stable asset quality and margins (adjusted for capital
raise). The strong growth rubbed off positively on
productivity ratios as well. As per expressed strategic
intent, the non-group lending products continued to
gain in the AUM mix adding further visibility to the
healthy and sustainable growth ahead.
We have raised our PAT estimates by 2/12% for
FY17/18E as we 1) pruned down assumptions on
priority sector shortfall with better information on
the agriculture book and 3) reduced allocation
towards liquid assets in the balance-sheet than was
earlier anticipated.
We remain positive on confluence of micro finance
business with the SFB model at Ujjivan. We continue
to value the stock at 3.0x FY18E ABV yielding a TP of
Rs 510. Considering the sharp run-up, we downgrade

the stock to NEUTRAL (from BUY) and await further

scale up of individual loan products and estimated
benefits on liabilities getting crystallized before
assigning a higher multiple.

Highlights of the quarter

Robust business momentum with growth in AUM

at 66.5/8.6% YoY/QoQ. Non-group lending was

even stronger at 92.5/13.0% YoY/QoQ with its
share in the AUM mix growing to 13.4% (1.8/0.5%
YoY/QoQ).
Growth is supported by strong customer
acquisition (36.1/7.5% YoY/QoQ).
Margins fairly stable; gradual improvement in
borrowing mix
Stable asset quality with GNPA ratio at 0.18% as
against 0.15/0.15% YoY/QoQ and coverage at
77.8% vs 73.3% in Q4FY16.

Financial Summary
(Rs bn)
Net Interest Income
PPOP
PAT
EPS (Rs)
Core ROAE (%)
Core ROAA (%)
Adj. BVPS (Rs)
P/ABV (x)
P/E (x)

1QFY17
1,707
1,143
714
6.0

1QFY16
965
564
352
5.2

YoY (%)
76.9%
102.7%
102.5%
15.4%

4QFY16 QoQ (%)

1,513
12.9%
925
23.6%
549
30.0%
5.4
11.3%

FY15
2,875
1,356
758
8.8
13.7
2.5
85.2
5.7
55.1

FY16
5,218
2,973
1,772
17.5
18.3
3.7
117.6
4.1
27.7

FY17E
7,541
4,291
2,635
22.3
17.5
3.6
152.0
3.2
21.8

FY18E
9,205
4,182
2,344
19.8
12.2
2.2
168.9
2.8
24.5

Source: Bank, HDFC sec Inst Research

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters

UJJIVAN FINANCIAL SERVICES : RESULTS REVIEW 1QFY17

Robust business momentum: The business

momentum continued apace with growth in

AUM at 66.5/8.6% YoY/QoQ and the growth in
disbursements
at
55.4/-10.1%
YoY/QoQ
(sequential de-growth in the disbursements
largely mirroring seasonality).

The cost of funds is down 134/4 bps YoY/QoQ.

acquisition with number of customers growing to

3.3 million (36.1/7.5% YoY/QoQ).

We estimate further reduction in costs of funds

on conversion to SFB, providing cushion against
both the regulatory (SLR/CRR/PSL Shortfall) and
operational costs towards SFB conversion. We
estimate core lending spreads to hold strong,
while NIMs (calculated on Earning Assets
including SLR/CRR) shows an optical decline to
8.8% in FY18 as against 11.1% in FY16.

Individual products continue to gain in share: As

Asset quality holds stable: The asset quality for

per the strategic intent the growth in the Nongroup lending was even stronger at 92.5/13.0%
YoY/QoQ gaining 1.8/0.5% YoY/QoQ in the AUM
mix to 13.4%. While the growth in the Individual
Lending has been strong across the segmentMSE, Housing, Agri and Animal Husbandry.

the company held stable with GNPA ratio at

0.18% as against 0.15/0.15% YoY/QoQ and the
coverage ratio at 77.8% vs 73.3% in Q4FY16.
With the increased share of individual loans, we
estimate provisioning costs at 0.7% in FY18E as
against 0.6% in FY16.

Going forward led by healthy growth in the

Lower Cost Income Ratio aided by both the

The growth is supported by strong customer

microfinance business and even stronger growth

in the individual lending business we estimate
AUM CAGR 34% FY17-FY18.

Margins, fairly stable; gradual improvement in

borrowing mix: The reported margins stood at

12.96% as against 11.59/12.65% YoY/QoQ.
Sequential gain in margin is largely led by the
higher capital ratios. We also note the gradual
improvement in the borrowing mix with the
share of commercial paper 2.0% as against nil
last year.

productivity and AUM mix: The cost to income

ratio was down to 45.6% as against 54.3/48.8%.
We map the same to improved productivity as
well as increasing share of the individual loans
entailing higher ticket size. Going forward we
estimate cost/income ratio to inch up to
51/62.2% in FY17E/FY18E as the expenses are
incurred on technology and people towards SFB
conversion.

Page | 2

UJJIVAN FINANCIAL SERVICES : RESULTS REVIEW 1QFY17

Q1FY17 Financial Summary-Strong Operating performance

Strong growth in NII led by

robust AUM growth and also
the capital raise
Non-interest income rises on
high securitized book and
AUM growth

Growth in expenses lags

income growth resulting in
productivity gains

Strong customer acquisition

Higher Tier I aides sequential

gains in margins

Asset quality holds fairly

stable

Q1FY16
1,927
962
965
261
133
18
110
1,227
662
445
217
564
35
529
177
352
5

Q4FY16
2,692
1,179
1,513
287
224
25
39
1,800
875
538
337
925
82
843
294
549
5

Q1FY17
2,912
1,204
1,707
382
202
103
76
2,089
946
599
347
1,143
62
1,081
367
714
6

QoQ%
8.1%
2.1%
12.9%
32.7%
-9.8%
321.7%
94.7%
16.0%
8.1%
11.3%
2.9%
23.6%
-24.2%
28.3%
25.0%
30.0%
11.3%

YoY%
51%
25%
77%
46%
52%
462%
-31%
70%
43%
35%
60%
103%
78%
104%
108%
103%
15%

35,140
34908.79
231.57
0.7%
12088
2.41
NA

53886
50644.00
3242.00
6.4%
20900
3.05
NA

58,509
55,575
2933.90
5.3%
18787
3.28
0.23

8.6%
9.7%
-9.5%
-17.5%
-10.1%
7.5%

66.5%
59.2%
1167.0%
695.8%
55.4%
36.1%

120%
22.0%

124%
24.1%

140%
29.0%

15.7%
4.9%

20.3%
7.0%

Cost of funds
Net interest margin
Cost/Income

12.90%
11.59%
54.3%

11.60%
12.65%
48.8%

11.56%
12.96%
45.6%

0.0%
0.3%
-3.2%

-1.3%
1.4%
-8.7%

Gross NPA
Gross NPA / On-Book AUM (%)
Coverage
Source: Bank, HDFC sec Inst Research

52.36
0.15%
73.33%

77.87
0.15%
73.33%

100.03
0.18%
77.78%

28.5%
0.03%
4.4%

91.0%
0.00%
0.0%

Interest income
Interest expenses
Net interest income
Non-interest income
Processing and other fees
Income from other Financial Ser
Miscellaneous income
Net revenue
Operating expenses
Employee expenses
Others
Pre-provision profit
Provisions and write-offs
PBT
Tax expenses
PAT
EPS, Rs
Total AUM
On-Book
Off-Book
% of Total
Disbursements
No of customers (mln)
Additions QoQ (mln)
AUM/Borrowings
CAR

Page | 3

UJJIVAN FINANCIAL SERVICES : RESULTS REVIEW 1QFY17

Growth & AUM-Robust

Robust AUM growth

As per the strategic intent the
share of individual lending
continue to gain

Sequential decline in the

disbursements largely
attributable to seasonality

Growth supported by strong

customer acquisition

Rs mn
Total AUM
On-Book
Off-Book
% of Total
Mix
GL (Microfinance)
Individual Lending
MSE
Housing
Agri and Animal Husbandry Loan
Others
% share
GL (Microfinance)
Individual Lending
MSE
Housing
Agri and Animal Husbandry Loan
Others
Disbursements
GL (Microfinance)
Individual
MSE
Housing
Agri and Animal Husbandry
Others
GL (Microfinance)
Individual
MSE
Housing
Agri and Animal Husbandry Loan
Others
No of customers (mln)
Additions QoQ (mln)
Customer retention ratio
Type of Loan
Repeat
Fresh
Source: Bank, HDFC sec Inst Research

Q1FY16
35,140
34,909
232
0.7%
35,133
31,060
4,072
1,878
1,408
746
40

Q4FY16
53,886
50,644
3,242
6.4%
53,886
46,950
6,936
2,745
2,502
1,613
77

Q1FY17
58,509
55,575
2,934
5.3%
58,498
50,660
7,838
2,950
2,866
1,944
78

QoQ%
8.6%
9.7%
-9.5%
-17.5%
8.6%
7.9%
13.0%
7.5%
14.6%
20.5%
1.3%

YoY%
66.5%
59.2%
1167.0%
695.8%
66.5%
63.1%
92.5%
57.1%
103.5%
160.6%
94.0%

88.4%
11.6%
5.3%
4.0%
2.1%
0.1%
12,088
10,778
1,314
589
456
252
16
89.1%
10.9%
4.9%
3.8%
2.1%
0.1%
2.4
NA
89.2%

87.1%
12.9%
5.1%
4.6%
3.0%
0.1%
20,900
18,576
2,324
871
819
621
14
88.9%
11.1%
4.2%
3.9%
3.0%
0.1%
3.1
NA
86.3%

86.6%
13.4%
5.0%
4.9%
3.3%
0.1%
18,787
16,630
2,157
768
772
600
16
88.5%
11.5%
4.1%
4.1%
3.2%
0.1%
3.3
0.2
85.6%

-0.5%
0.5%
-0.1%
0.3%
0.3%
0.0%
-10.1%
-10.5%
-7.2%
-11.7%
-5.7%
-3.4%
19.7%
-0.4%
0.4%
-0.1%
0.2%
0.2%
0.0%
7.5%

-1.8%
1.8%
-0.3%
0.9%
1.2%
0.0%
55.4%
54.3%
64.2%
30.4%
69.3%
137.8%
1.2%
-0.6%
0.6%
-0.8%
0.3%
1.1%
0.0%
36.1%

-0.70%

-3.57%

65.7%
34.3%

64.8%
35.5%

66.0%
34.0%

1.2%
-1.5%

0.3%
-0.3%
Page | 4

UJJIVAN FINANCIAL SERVICES : RESULTS REVIEW 1QFY17

Margins-Stable, Borrowing Mix Showing Gradaul Improvement as Expected

Borrowing profile shows

gradual improvement with
the inch up of commercial
paper

Margins-Reported
Cost of funds
Net interest margin
CARR
Borrowing Mix
Term Loans, Cash Credit & Overdraft
Refinance Facility*
Securitization (Off Balance Sheet)
Non Convertible Debentures
Sub Debt
Commercial Paper
Total
Source: Bank, HDFC sec Inst Research

Q1FY16

Q4FY16

Q1FY17

QoQ%

YoY%

12.90%
11.59%
22.00%

11.60%
12.65%
24.10%

11.56%
12.96%
29.00%

0.0%
0.3%
4.9%

-1.3%
1.4%
7.0%

79.00%
3.00%
0.00%
16.00%
2.00%
0.00%
100.00%

75.00%
5.00%
7.00%
11.00%
1.00%
0.00%
100.00%

73.00%
5.00%
7.00%
12.00%
1.00%
2.00%
100.00%

-2.0%
0.0%
0.0%
1.0%
0.0%
2.0%

-6.0%
2.0%
7.0%
-4.0%
-1.0%
2.0%

Q1FY16
52.36
0.15%
13.96
0.04%
73.33%
0.41%
99.78%

Q4FY16
77.87
0.15%
20.36
0.04%
73.33%
0.66%
99.81%

Q1FY17
100.03
0.18%
22.23
0.04%
77.78%
0.44%
99.80%

QoQ%
28.46%
0.03%
9.18%
0.00%
4.44%
-0.22%
0.00%

YoY%
91.04%
0.00%
59.20%
0.00%
0.00%
0.00%
0.00%

Q1FY16
54.3%
8.0%
3.0%
77.70
4.60
NA

Q4FY16
48.8%
7.3%
2.1%
114.90
6.90
761.00

Q1FY17
45.6%
7.2%
2.6%
124.70
7.10
815.00

QoQ%
-3.2%
-0.1%
0.5%
8.5%
2.9%
7.1%

YoY%
-8.7%
-0.8%
-0.4%
60.5%
54.3%
NA

Asset Quality
Headline asset quality fairly
stable
Coverage ratio shows
improvement
Overall Repayment rate
remain strong

Gross NPA
Gross NPA / On-Book AUM (%)
Net NPAs
Net NPAs / On-Book AUM (%)
Coverage
Provision % AUM
Repayment Rate
Source: Bank, HDFC sec Inst Research

Productivity
Cost/Income
Cost/AUM
Other Income/AUM
Loan book per Employee
Loan book per Branch
No Of customers per Employee (Reported)
Source: Bank, HDFC sec Inst Research

Page | 5

UJJIVAN FINANCIAL SERVICES : RESULTS REVIEW 1QFY17

Change In Estimates

Higher than estimated

growth, pruning down our
estimate on PSL shortfall
aides earning upgrade

FY17E

(Rs bn)
NII
PPOP
PAT
Adj. BVPS (Rs)
Source: HDFC sec Inst Research

Old
7,133
4,166
2,579
153

FY18E
New
7,541
4,291
2,635
152

Change
5.7%
3.0%
2.2%
-1.0%

Old
8,290
3,658
2,098
171

New
9,205
4,182
2,344
170

Change
11.0%
14.3%
11.8%
-0.4%

Peer Valuations
Banks

Mcap
(Rs bn)

CMP
(Rs)

Rating

TP (Rs)

AXSB
CUB
DCBB
FB
ICICIBC #
IIB
KMB#
BOB
OBC
SBIN #
UNBK
Ujjivan

1,315
75
32
111
1,435
719
1,380
346
35
1,768
87
57

551
126
112
64
247
1,208
753
150
116
228
126
486

NEU
BUY
BUY
BUY
BUY
BUY
BUY
BUY
NEU
BUY
NEU
NEU

522
132
115
70
274
1,188
761
170
112
241
133
510

FY16E
212
46
58
42
113
285
120
72
138
99
91
118

ABV (Rs)
P/E (x)
P/ABV (x)
ROAE (%)
ROAA (%)
FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E
225
261 16.0
16.4
13.7 2.60
2.45
2.11 16.8
14.2
15.0 1.67
1.39 1.40
52
60 16.9
15.3
13.1 2.76
2.42
2.10 15.5
15.1
15.6 1.50
1.46 1.46
63
71 16.3
18.4
14.6 1.93
1.77
1.56 11.9
9.5
10.6 1.10
0.81 0.82
44
50 23.2
16.6
12.6 1.55
1.45
1.29
6.0
8.0
9.8 0.55
0.68 0.77
119
138 11.7
10.7
8.3 1.73
1.61
1.34 11.1
10.7
12.4 1.42
1.36 1.50
328
381 31.4
24.4
19.2 4.23
3.69
3.17 16.6
15.9
17.5 1.82
1.88 1.93
136
155 55.8
34.5
27.4 5.32
4.55
3.85 11.0
12.9
14.4 1.41
1.58 1.64
88
121
-6.4
16.0
9.6 2.08
1.70
1.24 -14.4
5.9
9.2 -0.78
0.31 0.47
126
160 25.7
8.8
5.3 0.84
0.92
0.72
1.2
3.3
5.3 0.07
0.19 0.29
109
127 13.1
11.4
8.4 1.69
1.57
1.29
7.9
8.5
10.3 0.46
0.49 0.57
110
156
6.4
5.3
3.6 1.38
1.15
0.81
7.0
7.8
10.4 0.34
0.39 0.51
152
169 27.7
21.8 24.5 4.12
3.19 2.87 18.3
17.5
12.2 3.65
3.65 2.15

Source: Company, HDFC sec Inst Research, # Adjusted for embedded value of subs

Page | 6

UJJIVAN FINANCIAL SERVICES : RESULTS REVIEW 1QFY17

Income Statement
(Rs mn)

Balance Sheet
FY14

FY15

FY16

FY17E

FY18E

Interest Earned

3,289.0

5,589

9,453

13,781

18,356

SOURCES OF FUNDS

Interest Expended
Net Interest Income

1,398.5
1,890.4

2,714
2,875

4,235
5,218

6,241
7,541

9,151
9,205

Share capital
Reserves and surplus

Other Income
Total Income
Total Operating Exp

287.9
2,178.3
1,206.8

530
3,405
2,049

823
6,041
3,068

1,217
8,757
4,466

1,860
11,065
6,883

971.6

1,356

2,973

4,291

4,182

82.9

210

253

272

597

888.6
304.26

1,145
387

2,720
948

4,019
1,384

584

758

1,772

2,635

PPOP
Provisions & Contingencies
PBT
Provision for Tax
PAT
Source: Bank, HDFC sec Inst Research

(Rs mn)

FY14

FY15

FY16

FY17E

FY18E

656
3,069

861
6,503

1,012
10,966

1,182
16,867

1,182
19,145

Shareholders' funds
Total Borrowings
Other Liabilities, provisions

3,725
16,500
562

7,365
31,218
1,180

11,978
43,380
1,915

18,049
66,859
2,351

20,328
106,975
3,150

Total

20,787

39,763

57,273

87,259

130,453

3,585
1,240

APPLICATION OF FUNDS
Advances

16,173

32,187

50,644

58,769

78,750

2,344

Investments
Fixed assets
Other Assets

1
127
4,486

1
179
7,395

1
242
6,386

14,208
1,464
12,818

28,245
2,218
21,239

Total assets

20,787

39,763

57,273

87,259

130,453

AUM

16,173

32,187

50,644

58,769

78,750

Source: Bank, HDFC sec Inst Research

Page | 7

UJJIVAN FINANCIAL SERVICES : RESULTS REVIEW 1QFY17

Key Ratios
FY14

FY15

FY16

FY17E

FY14

FY15

FY16

FY17E

FY18E

11.8

23.5

77.7

77.7

364.5

2.2
0.1

6.0
0.1

20.4
0.2

123.0
0.6

212.3
0.7

0.0
85.7
0.6

0.0
71.4
0.9

0.0
73.8
0.6

0.2
66.1
0.4

0.3
59.6
0.7

11.01
1.68

9.5
1.8

10.8
1.7

10.4
1.7

8.5
1.7

Operating Cost
Provisions
Tax

7.03
0.48
1.77

6.8
0.7
1.3

6.3
0.5
2.0

6.2
0.4
1.9

6.3
0.5
1.1

ROAA

3.40

2.5

3.7

3.6

2.2

ROAE

16.93

13.7

18.3

17.5

12.2

FY18E

VALUATION RATIOS
EPS
Earnings Growth (%)

8.91
77.79

8.8
29.7

17.5
133.8

24.3
62.2

21.1
(13.0)

BVPS
Adj. BVPS (ex reval. & 100% cover)
RoAA (%) (on total assets)

56.80
56.62
3.40

85.5
85.2
2.5

118.4
117.6
3.7

154.7
154.0
3.9

175.3
172.2
2.2

ROAE (%)

16.93

13.7

18.3

19.0

12.8

P/E (x)

57.46

58.2

29.2

21.1

24.2

P/BV (x)
P/PPOP (x)

9.01
34.56

6.0
32.5

4.3
17.4

3.3
12.9

2.9
13.6

0.00

0.00

0.00

Dividend Yield (%)

PROFITABILITY
Yield on Funds (%)

19.83

19.0

20.1

19.5

17.6

Cost of Funds (%)

10.57

11.4

11.4

11.1

10.5

Spread (%)
Core Spreads (%)
NIM (%)

9.27
13.2
11.40

7.6
11.2
9.8

8.7
10.3
11.1

8.4
9.5
10.8

7.1
9.4
8.7

Cost/Avg. AUM Ratio (%)

Cost-Income Ratio (%)
BALANCE SHEET STRUCTURE
RATIOS
AUM Growth (%)
Loan Growth (%)

8.80
55.40

8.4
60.2

7.1
50.8

6.6
48.1

7.9
60.8

43.63
43.63

102.45
99.0

64.58
57.3

38.00
20.4

35.00
35.0

Borrowing Growth (%)

Equity/Assets (%)
Equity/Loans (%)
Tier I CAR

65.42
17.92
23.03
21.81

89.2
18.5
22.9
21.70

39.0
20.9
23.7
22.40

60.9
20.2
30.0
29.29

65.0
14.9
25.2
24.99

ASSET QUALITY
Gross NPLs (Rsm)
Net NPLs (Rsm)
Gross NPLs (%)
Net NPLs (%)
Coverage Ratio (%)
Provision/Avg. AUM (%)
ROAA TREE (On Total Assets)
Net Interest Income
Non Interest Income

Source: Bank, HDFC sec Inst Research

OPERATING EFFICIENCY

Page | 8

UJJIVAN FINANCIAL SERVICES : RESULTS REVIEW 1QFY17

RECOMMENDATION HISTORY
Ujjivan

580

Date
27-Jun-16
02-Aug-16

TP

480

CMP
379
486

Reco
BUY
NEU

Target
510
510

380
280
180

Aug-16

Jul-16

Jul-16

Jul-16

Jul-16

Jun-16

Jun-16

Jun-16

Jun-16

May-16

May-16

May-16

May-16

80

Rating Definitions
BUY
: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL
: Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Page | 9

UJJIVAN FINANCIAL SERVICES : RESULTS REVIEW 1QFY17

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Page | 10