Summary
Ujjivan Small Finance Bank Limited - Q3 FY 2026 Earnings Call Summary Thursday, January 22, 2026 5:00 PM
Event Participants
Executives 10 Ashish Goel (Chief Credit Officer), Brajesh Cherian (Chief Risk Officer), Carol Furtado (Executive Director), Gaurav Sah (Lead Investor Relations), Hitendra Jha (Head Retail Liabilities TASC & TPP), Martin P S (Chief Operating Officer), Sadanand Balakrishna Kamath (Chief Financial Officer), Sanjeev Nautiyal (MD & CEO), Siddharth Bharadwaj (Head Investor Relations), Umesh Arora (Head Emerging Business), Vibhas Chandra (Head Microbanking)
Analysts 8 Ajit Kumar (JM Financial), Ashlesh Sonje (Kotak Securities), Chintan Shah (ICICI Securities), Deepak Poddar (Sapphire Capital), Hitendra Pradhan (Maximal Capital), Khushwant Pahwa (KPAC Marketing), Pritesh Bumb (Individual Analyst), Rajiv Mehta (YES Securities), Shreepal Doshi (Equirus Capital), Suraj Das (Sundaram Mutual Funds)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Gross Loan Book (GLB) | ₹37,057 crores | +21.6% YoY, +7.1% QoQ; driven by highest-ever quarterly disbursements of ₹8,293 crores. |
| Total Deposits | ₹42,223 crores | +22.4% YoY, +7.7% QoQ; sustained momentum in CASA and retail mobilization. |
| CASA Ratio | 27.0% | Flat QoQ; remained above 27% for two consecutive quarters with 33.2% YoY growth in CASA balances. |
| Net Interest Income (NII) | ₹1,000 crores | +12.8% YoY, +8.5% QoQ; highest ever reported NII supported by lower cost of funds and volume growth. |
| Net Interest Margin (NIM) | 8.2% | +30 bps QoQ; supported by 26 bps reduction in cost of funds and CRR relaxation. |
| Cost of Funds | 7.08% | -26 bps QoQ; reflection of deposit rate cuts taken in H1 and efficient liquidity planning. |
| Gross NPA (GNPA) | 2.4% | Improved from 2.5% QoQ; slippages moderated to ₹221 crores from previous stress levels. |
| Net NPA (NNPA) | Not explicitly stated | PCR increased 300 bps QoQ to 76%. |
| Credit Cost | ₹195 crores | Includes ₹9 crores accelerated provision; management expects further reduction in Q4. |
| Cost-to-Income | 66.0% | Flat QoQ; adjusted for ₹18 crore one-off labor code impact, the ratio was sub-65%. |
| PAT | ₹186 crores | Significant sequential improvement; ROA stood at 1.5% and ROE at 11.5%. |
| Capital Adequacy (CRAR) | Not explicitly stated | Management cited “strong capital adequacy” supporting growth. |
| Liquidity Coverage (LCR) | 165.6% | Maintains a robust liquidity buffer despite tight market conditions. |
Geographic & Segment Commentary
- Microbanking: The segment saw disbursements of ₹4,688 crores (+62.4% YoY) and added 1.4 lakh new customers. Collection efficiency in Bucket X reached 99.7% in December 2025, marking seven months of consecutive improvement.
- Secured Portfolio: Now constitutes 48% of the total book, nearing the FY26 target of a 50-50 mix. Affordable Housing grew 40.3% YoY to ₹8,231 crores, while Micro Mortgages more than doubled YoY to ₹1,329 crores.
- Emerging Businesses: MSME book grew 69.1% YoY to ₹2,865 crores with improving asset quality (GNPA at 4.1%). Gold loans scaled 5-fold YoY to ₹557 crores, now offered at 349 branches with average monthly disbursements of ₹100 crores.
- Vehicle & Agri: Vehicle finance grew 120% YoY to ₹823 crores, driven by two-wheeler demand. Agri loans reached ₹607 crores (+212% YoY), supported by a shift toward higher-yielding products.
Company-Specific & Strategic Commentary
- Product Mix Diversification: Management is executing a shift toward a 70% secured and 30% unsecured mix by FY2030 to ensure long-term stability and lower credit costs.
- Liability Franchising: Reduced savings account rates by 25-50 bps in lower brackets effective January 9 to optimize cost of funds, targeting an exit cost of funds of 7.0% by FY26 end.
- Universal Banking License: The application has been with the RBI for 12 months; management noted it is under “active consideration” but provided no specific timeline for approval.
- Operational Efficiency: While OPEX remains elevated due to branch expansion (total 777 branches) and labor code adjustments, management expects operating leverage to kick in from FY27.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| ROA | 1.2% - 1.4% (FY26) | Confident in meeting range despite one-off costs, driven by higher Q4 disbursements and lower credit costs. |
| ROE | 10% - 12% (FY26) | Supported by NII expansion and normalization of credit costs toward the 1.0-1.5% steady-state range. |
| Asset Mix | 50% Secured (FY26) | On track to reach a balanced mix by year-end, moving toward 70% secured by FY30. |
| Cost of Funds | ~7.0% (Exit Q4 FY26) | Benefit from recent SA rate cuts and maturity of high-cost term deposits. |
Risks & Constraints
| Risk | Context |
|---|---|
| Asset Quality (West Bengal) | While PAR 0 is improving, 90+ DPD remains slightly elevated in West Bengal; management is monitoring upcoming elections but sees limited impact due to urban concentration. |
| Competitive Intensity | Affordable Housing yields saw a 20 bps compression due to repo rate pass-through and high competitive intensity in the ₹15 lakh ticket size segment. |
| Regulatory Uncertainty | The timeline for the Universal Banking License remains uncertain, which could impact long-term capital structure and branding strategies. |
Q&A Highlights
Asset Quality & Credit Costs
- Question: When will credit costs normalize to the steady-state 1%-1.5% range? (Deepak Poddar)
- Answer: Normalization has started in Q3. Expect significant improvement in Q4 and full normalization by the end of H1 FY27 as the lag in NPA recognition clears (Ashish Goel).
Microfinance Guardrails
- Question: How are rejection rates trending following MFIN Guardrail 2.0 implementation? (Shreepal Doshi)
- Answer: Rejection rates initially spiked to 46-47% but have moderated to 35-36%. Customers with 3+ lenders have dropped from 15% to 2.5% of the portfolio (Vibhas Chandra).
Margin Sustainability
- Question: Can NIMs improve further from the 8.2% level? (Rajiv Mehta)
- Answer: NIMs are expected to stay at current levels or improve. Support will come from falling cost of funds (SA rate cuts) and a revival in higher-yielding microfinance growth (Sanjeev Nautiyal).
OPEX & Efficiency
- Question: Will the collection team size be reduced as stress moderates? (Rajiv Mehta)
- Answer: No meaningful decline expected in Q4 due to a long tail in micro-banking, but expect a reduction of 100-150 personnel per quarter starting Q1 FY27 (Ashish Goel).
Key Takeaway
Ujjivan SFB delivered a strong performance in Q3 FY26, characterized by record quarterly disbursements of ₹8,293 crores and a 30 bps sequential expansion in NIM to 8.2%. The bank is successfully pivoting its portfolio toward a 50% secured mix, with the MSME and Gold loan segments showing robust triple-digit and five-fold growth respectively. Asset quality showed clear signs of stabilization as slippages moderated and the PCR strengthened to 76%. Management maintained its FY26 ROA guidance of 1.2%-1.4%, citing a further expected decline in credit costs and the realization of deposit rate cut benefits. While the Universal Banking license remains a “wait-and-watch” item, the bank’s focus on building a 35% CASA ratio and a 70% secured book by FY30 positions it for durable, lower-risk profitability. Management remains confident of a strong Q4 finish to the fiscal year.
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