Ujjivan Small Finance Bank Ltd. Stock: Buy Or Sell?

 Ujjivan Small Finance Bank Ltd. Stock: Buy Or Sell?

Ujjivan Small Finance Bank Ltd. is the youngest and fastest-growing private sector bank in India. It has performed well, along with other banks in the Asian region, backed by supportive monetary policies of central banks across emerging markets. Ujjivan Small Finance Bank Ltd. has been one of the few Indian lenders that have scaled up its capital base and achieved profitable growth since demonetization (November 2016).


Ujjivan Small Finance Bank Ltd. Overview

Ujjivan Small Finance Bank Ltd. is an Indian banking company headquartered in Bengaluru, Karnataka. The bank provides a range of banking products and services to its customers including personal banking, corporate banking, SME banking, and rural banking.

The bank was founded in 2005 as a microfinance institution and was later converted into a small finance bank in 2015. The bank had a total of 538 branches and 2,534 ATMs as of March 2019. It serves over 9 million customers across India.

The bank reported a net profit of Rs 1,372 crore for the financial year 2018-19. Its net interest income stood at Rs 3,879 crore and its gross non-performing assets (NPA) were at 2.6% of gross loans as of March 2019.

The stock of Ujjivan Small Finance Bank Ltd. is listed on the BSE and NSE stock exchanges.

What are the fundamentals of Ujjivan?

Ujjivan Small Finance Bank Ltd. is an Indian banking company headquartered in Bengaluru, Karnataka. The bank was founded in 2005 as a microfinance institution and converted into a small finance bank in 2015. Ujjivan offers banking services to the urban poor and micro-entrepreneurs through its network of branches across India.

The bank's focus on financial inclusion has made it a leading player in the small finance bank space. In FY2019, Ujjivan served over 9 million customers with a loan portfolio of Rs 38,551 crore and deposits of Rs 25,708 crore. The bank's strong growth has been driven by its focus on technology, customer service, and responsible lending practices.

Technology: Ujjivan was one of the first small finance banks in India to adopt a fully digital model for customer onboarding and loan disbursement. The bank has also invested heavily in mobile banking and self-service channels such as ATMs and point-of-sale (POS) terminals. These investments have helped Ujjivan reduce its dependence on physical branches and improve its operating efficiency.

Customer service: Ujjivan provides doorstep banking services to customers who do not have access to formal banking channels. The bank's extensive branch network and use of technology have enabled it to reach out to customers in remote areas. Ujjivan's focus on providing quality customer service has helped it build a loyal customer base.

Responsible lending: Ujjivan follows

Why is Ujjivan's share price declining?

Ujjivan's share price has been on a decline since the beginning of 2018. The main reasons for this are:

1) Ujjivan is heavily reliant on fresh deposits to fund its lending activities. With interest rates on deposits falling, the cost of funds for Ujjivan has increased, putting pressure on its margins.

2) The RBI's decision to reduce the loan limits for small finance banks has also hit Ujjivan's growth prospects.

3) Asset quality issues have also been a concern for investors in Ujjivan. The non-performing assets (NPA) ratio has risen from 1.6% in FY17 to 2.4% in FY18.

4) Rising competition from larger players such as HDFC Bank and ICICI Bank in the small finance bank space is another headwind for Ujjivan.

5) Valuations are also an issue at present, with Ujjivan trading at around 5 times its FY18 book value.

Is it time to buy or sell this stock?

Ujjivan Small Finance Bank Ltd. is an Indian bank and one of the leading small finance banks in the country. The company's shares have been on a roll in recent months, and its stock price has more than doubled since August 2020.

With the company's strong performance and positive outlook, many investors are wondering if now is the time to buy or sell Ujjivan Small Finance Bank Ltd. stock.

Here's a closer look at the factors to consider before making a decision on this stock.

Company Overview

Ujjivan Small Finance Bank Ltd. was founded in 2015 and is headquartered in Bengaluru, India. The bank provides banking services to under-served and under-banked segments of the Indian population, including small businesses, low-income households, and rural communities.

The company has a network of over 700 branches and 2,000 ATMs across India. It offers a range of banking products and services, including savings and deposit accounts, loans, credit cards, money transfers, and more.

Ujjivan Small Finance Bank Ltd.'s shares were listed on the Bombay Stock Exchange (BSE) in November 2019. The stock has been on a tear since then, rising nearly 200% from its IPO price of Rs 32 per share to its current price of around Rs 95 per share.

Financial Performance

Ujjivan Small Finance Bank Ltd.'s financial performance has been impressive since it went public. In the

How should he/she invest in Ujjivan Small Finance Bank Ltd.?

If you are looking for a small finance bank stock to buy or sell, Ujjivan Small Finance Bank Ltd. (USFB) is a good choice. The bank has a strong presence in rural and semi-urban areas of India with over 1,000 branches and 3,000 ATMs. It is well-capitalized and has a healthy loan portfolio.

The bank's stock is currently trading at around Rs 70, which is close to its 52-week high of Rs 72. The stock has been on an uptrend since March 2020 and has gained nearly 60% since then.

At the current price, Ujjivan Small Finance Bank's stock is trading at a PE ratio of 35x its FY2021 earnings estimates. This is expensive when compared to other small finance banks such as Jana Small Finance Bank Ltd. (JSFB), which is trading at a PE ratio of 25x its FY2021 earnings estimates.

However, Ujjivan Small Finance Bank's higher valuation can be justified by its faster growth rate. For FY2021, the bank is expected to report a 28% year-on-year (YoY) growth in net profit. In comparison, Jana Small Finance Bank is expected to report a 16% YoY growth in net profit for the same period.

Considering Ujjivan Small Finance Bank's strong growth prospects and healthy balance sheet, we believe that the stock is a good long-term investment proposition.

Ujjivan small finance bank calculator

If you're thinking of buying or selling Ujjivan Small Finance Bank Ltd. stock, our nifty little calculator can help you figure out how much you could make (or lose). Just enter the number of shares you're thinking of buying or selling, and our calculator will do the rest.

Please note that this is only a hypothetical tool, and does not take into account real-world factors such as brokerage fees, taxes, etc. Please consult a financial advisor before making any investment decisions.

Ujjivan small finance bank Asset

Ujjivan Small Finance Bank Ltd. is an Indian banking company headquartered in Bangalore, Karnataka. The company was founded in 2005 and offers a variety of banking products and services including loans, deposits, debit cards, and credit cards. As of March 31st, 2018, Ujjivan Small Finance Bank had a network of 511 branches across 27 states and two union territories with over 2.4 million customers.

The company's primary focus is on serving the unserved and underserved markets which include low-income households, small businesses, and women entrepreneurs. Ujjivan Small Finance Bank reported gross loan assets of Rs 25,730 crore for the financial year ending March 31st, 2018. The non-performing loan ratio stood at 1.47%.

The bank has been able to grow its loan book at a compound annual growth rate (CAGR) of 59% over the last three years while maintaining healthy asset quality. The net interest margin (NIM) for the financial year ending March 31st, 2018 was 5%. The return on equity (RoE) stood at 18%.

Ujjivan Small Finance Bank's share price has risen by 35% since its listing in January 2018. At the current share price of Rs 421, the stock trades at 3x FY2018 book value and 18x FY2018 earnings. We believe that Ujjivan Small Finance Bank is well-positioned to capitalize on the growing demand for formal credit in India's under-

Conclusion

Ujjivan Small Finance Bank is a good buy for long-term investment. The bank has strong fundamentals and is expected to grow at a healthy pace in the coming years. The stock is currently trading at a discount to its book value and thus, offers an attractive entry point for long-term investors.

Pros

Ujjivan Small Finance Bank Ltd. is a scheduled commercial bank that was originally a microfinance institution. The company is based in Bengaluru, India, and was founded in 2005. Ujjivan Small Finance Bank went public in 2016 and is listed on the Bombay Stock Exchange and the National Stock Exchange of India.

The bank offers a range of banking products and services to its customers including savings accounts, fixed deposits, current accounts, recurring deposits, personal loans, home loans, auto loans, credit cards, debit cards, and third-party products such as insurance and mutual funds.

Some of the key reasons to consider buying Ujjivan Small Finance Bank Ltd. stock include:

1. The company has a strong track record of profitability with net profits growing at a compound annual growth rate (CAGR) of 41% between FY2014 and FY2018.

2. The company has a geographically diversified customer base with over 4 million customers as of March 31, 2019.

3. The company's gross loan portfolio has grown at a CAGR of 45% between FY2014 and FY2018.

4. The company's non-performing assets (NPA) ratio stood at 0.6% as of March 31, 2019, which is significantly lower than the industry average of 5%.

Cons

The Ujjivan Small Finance Bank Ltd. stock may not be a good investment for some people because:

-The company is still relatively new, having only been founded in 2015. This means that there is more risk involved in investing in the company than there would be with a more established company.

-The company has yet to prove itself to be profitable. In its most recent fiscal year, Ujjivan reported a net loss of Rs. 1,019 crores (approximately $140 million).

-The stock is currently trading at around Rs. 700 ($9.50), which is close to its 52-week high. This means that there may not be much room for the stock to grow in the short term, and investors could see losses if the stock price falls back down.


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