Ujjivan SFB Targets 25% Growth In FY25 Loan Book | NDTV Profit - video Dailymotion

NDTV Profit

Watch Ujjivan SFB Targets 25% Growth In FY25 Loan Book | NDTV Profit - NDTV Profit on Dailymotion

Transcript

00:00I think it's important to try and take stock of what is the outlook on credit growth going

00:05ahead for FY25.

00:07Ujjain Small Finance Bank came out with the numbers last week, but it's a good time to

00:10get in Itera Davis, MDA and CEO of the bank, to try and understand what could happen in

00:15the quarters to come.

00:16Their quarter, on a sequential basis, was flattish on a YOI basis.

00:21I think on most counts, they did really well.

00:23NI was up 27%.

00:25Pat was up about 6%, YOI provisions were also a bit mixed, of course, up about 25% quarter

00:33on quarter.

00:34Mr. Davis, good having you.

00:35Thanks so much for taking the time out.

00:36This is Neeraj here.

00:37Good morning.

00:38How do you sense the possibility of credit growth in FY25?

00:43Because one of the most common arguments that I see, this is for the banking space at large,

00:48not just about Ujjain, of course, but the most common argument that I see or hear is

00:53that corporates, large, mid, small, are not necessarily depending only on banking finance

01:01for funding any kind of CAPEX that may have.

01:04Any thoughts on this topic, sir?

01:07Good morning, Neeraj.

01:08Thank you for having me on NDTV.

01:11I think it's a good question.

01:13We have had two and a half years of good credit growth.

01:16I mean, all banks are doing extremely well.

01:20The whole segment is doing extremely well.

01:22So I think the question is, how is the economy going to do from here onwards?

01:28And that will also play an important role in demand.

01:31And also the deposit creation in the market is getting a bit difficult.

01:37Liquidity is a bit tight, although RBI has been seen to try and put some liquidity into

01:41the market.

01:43So given, I think maybe in the second quarter, we will see a lot more clarity on this post

01:51the election results.

01:52But I think right now the demand may be slowing in the large cap segment or the large corporates.

02:02It's also beginning to slow in the other areas, or rather the lenders are beginning to slow

02:06a little bit, even in the small lending space, the financial inclusion space, because it's

02:12a period of consolidation.

02:15Two and a half years of growth post-COVID has been fantastic, but you can't carry on

02:20that forever.

02:21So I think it is a consolidation phase.

02:23And once the new budget is announced and we are into the second quarter of this year,

02:27there will be a lot more clarity.

02:31One of the feelings or the beliefs, aside of the technical nature of the MTM gains in

02:36bond portfolios, is that this large RBI dividend gives more ammo to the government to fund

02:43CapEx.

02:44And largely it's been public CapEx or government-driven CapEx that has been the driving force behind

02:54all the CapEx spends in the country thus far.

02:56The belief is that private sector, except in fits and starts, hasn't quite participated.

03:00Does this large dividend give some confidence that CapEx spends will continue, even if in

03:07the near term, until the US elections are out of the way, if at all that is a factor,

03:12that private CapEx doesn't come back in a hurry?

03:14No, I think there's a lot of hope placed on this huge dividend with the government so

03:19that some spending will start and move in that direction.

03:23And hopefully, by the fourth quarter, we are hoping that interest rates will also begin

03:28to start weakening and decline.

03:30So once that happens, some demand will come back through that process.

03:34But yes, most importantly, this dividend which the government has received is something that

03:40we are all hoping, as participants in the market, that some of that will be spent in

03:46capital development, in sort of other outlays.

03:50There's been also talk about increasing the outlay on artificial intelligence and so many

03:54other projects which are there.

03:56So any of those projects that take off in the second quarter and third quarter will

04:01help the spend in the markets.

04:06Okay, what about your own numbers, sir?

04:09The NIN numbers, etc. all looked okay.

04:13Was it provisioning or higher provisioning, YOY, that hit the bottom line numbers?

04:18And what's the reason for the same?

04:20And what's the outlook going ahead, particularly on the provisioning and the asset quality?

04:24I'll come to growth in a bit, of course.

04:26Right.

04:27I think good questions.

04:28As I mentioned in the other part of the overall discussion we had, there's been two and a

04:37half years of big growth and there's a lot of credit which has come into the market and

04:43a lot of borrowers.

04:45So I think we are seeing a little bit of, not pent up demand, it's the excess supply

04:53which has come into the market, which is now beginning to rear its head.

04:57And there is a bit of concern in credit quality and that is being seen.

05:03Some states we are seeing that people are looking at rescheduling or government support

05:09and therefore repayments have slowed down.

05:12In other places there's been excess supply and over-leveraging has taken place.

05:17So that's also coming to the forefront.

05:19So this business is based on cycles and this two and a half years, this is the consolidation

05:26cycle and I think the whole industry has to be prepared for it, especially in the financial

05:31inclusion space.

05:32And those who are prepared for it will be able to take it through in the next six to

05:3712 months.

05:38Because we have to see the effect of this wear out and I think it's an important part

05:43of the cycle that we are looking at.

05:47Got it.

05:51For your client set in particular, Mr. Davis, is there any kind of, how do you say, concern

05:59around maintaining the level of asset quality that you would have?

06:04Are there some reasons why, either regulatory or otherwise, that you might go slow?

06:13Either because regulation is saying X, Y, Z or maintaining asset quality might be more

06:19important than growth, if you will, in the balance that I'm talking about.

06:23Can you give us some color there, sir?

06:25Absolutely.

06:26I think maintaining asset quality in a bank and in a financial institution is the foremost

06:32important thing that we have to look at.

06:34And we have all learned that from what happened during COVID and a couple of other crises

06:38before that.

06:39So yes, that is going to be our forefront.

06:41Now fortunately for us, we are operational in 26 states and in no state we have exposure

06:47more than 15%.

06:49And that spread, that diversification, helps us a great deal in trying to slow down in

06:55some areas where there is an issue which we need to address.

06:59And we can continue business as usual in other areas which are doing well.

07:03So I think that advantage is available to us and others who may be concentrated in certain

07:09areas.

07:10If the area is doing well, great.

07:12If the area is having problems, they'll have to address it.

07:14So I think this is something that the industry has to take into account and we have taken

07:19that into account.

07:20And we have planned for this year based on that feedback.

07:24In fact, our guidance on provisioning for this year is a little higher than last year.

07:29And that is based on what we are expecting the market to do during the current financial

07:33year.

07:34It's not, well, technically what you're guiding to also in FY25 on the margin front, Mr. Davis,

07:39is not moderation.

07:40If I just look at the pure play numbers, what you did currently, 9.4% versus what you've

07:45got it for FY25, 9%.

07:48You would say maintenance of margins or would you say that no, there is a bit of a moderation

07:52that you're guiding to?

07:54The margins, it's a question of how we also manage internal liquidity and other ratios

08:00and things like that.

08:02So we are expecting the interest rates to stay high at these rates till about the fourth

08:08quarter.

08:09So there's not going to be any benefit from a downward turning interest rate curve, which

08:16will definitely come in the next financial year.

08:18So for this financial year, the guidance of 9% has been based on continuing where we are

08:24trying to hold on to the current interest rates on the term deposits and CASA.

08:32And building the CASA a little bit, we are at 26% on the CASA, we'd like to see that

08:39move towards 30%.

08:41And as that moves towards 30%, we'll be able to benefit from that on the NIM front, because

08:47that will reduce the burden of the term deposit interest.

08:51So it's a question of managing all these ratios from which we are able to see NIMs play out

08:56to 9%.

08:57So all in all, I think that is not going to be an issue.

09:01It'll allow us to build in some capacity to take care of the additional credit requirements.

09:08Okay.

09:09One final word, sir.

09:14I heard you mention at the start of this conversation that a lot of things hinge on the performance

09:19of the economy.

09:20All global forums, global investors, etc., all believe that the numbers, I mean, for

09:27them, India, related to the rest of the world, is good growth.

09:30I'm just trying to understand related to what India has done in the last two, three years.

09:34The earnings growth has been stupendous, but we've had four years of very strong earnings

09:38growth for India Inc. at large.

09:40Do you think we can do an encore on GDP and earnings, or could there be a bit of a moderation

09:47because of a number of things, including the fact that the Election Code of Conduct takes

09:51away some of the business decisions for the first quarter at the very least?

09:55Yeah, some moderation may happen this year, but that moderation doesn't mean that we are

10:00slowing down overall.

10:02We are still doing much better than other countries, and in the G20 itself, we are doing

10:08very well.

10:09So, I think moderation is not a bad thing by itself, but the level of moderation is

10:14important.

10:15You know, a little bit here and there, adjustments are often welcome as, you know, one step backwards

10:20perhaps before taking two steps forward.

10:23And I think that is, from time to time, we have to look at that and see how to manage

10:27that situation.

10:28Got it.

10:29Mr. Davies, great talking to you.

10:31Thanks so much for being with us and giving us your thoughts.

10:34We really appreciate your time.

10:36Thank you very much, Neel.

Ujjivan SFB Targets 25% Growth In FY25 Loan Book | NDTV Profit

Category

Transcript

Recommended