Ujjivan Small Finance Bank Ltd: Buy

CMP: Rs.40.15

The microfinance industry in India has witnessed strong growth, with a compound annual growth rate (CAGR) of 17% over FY20-24.

Notably, the industry saw a sharp recovery in FY23-24, achieving a robust 23% CAGR during FY22-24. This resurgence was driven by high demand, bolstered by strong customer additions and improved asset quality metrics, which have reached multi-year lows. Photo: Business Today.

Despite some lingering stress in the microfinance group segment, many banks are pursuing growth in a risk-calibrated manner. Although concerns around asset quality are expected to persist for the next couple of quarters, recovery is anticipated as the industry approaches the end of FY25. While the growth in group loans is likely to moderate, individual and housing loans are expected to remain key drivers of growth for banks in this sector.

Ujjivan Small Finance Bank (UJJIVANSFB) looks particularly attractive in this context. Its strong customer base, focus on individual loans, and relatively low asset quality issues position it well for sustained growth. Additionally, the bank's diversified loan portfolio and strategic approach to managing risk amidst the current challenges in the microfinance space make it a compelling choice for investors at the CMP.

Targets Given by Various Brokerage Houses for Ujjivan Small Finance Bank Ltd (Rs.40.15):

💢Emkay Global Finance Services -- Rs.55.

💢HDFC Securities -- Rs.65

💢JM Finance -- Rs.65

💢Kotak Institutional Equities  -- Rs.55.

💢Axis Securities -- Rs.52.