💰 Financial Performance

Revenue Growth by Segment

Total gross advances increased by 8% YoY to INR 32,122 Cr as of March 31, 2025. The secured loan segment grew significantly by 52.9% YoY in Q2 FY26, while individual loans (IL) grew 9.3% YoY to INR 5,464 Cr. Net Interest Income (NII) grew to INR 922 Cr in Q2 FY26, an increase of INR 65.7 Cr quarter-on-quarter.

Geographic Revenue Split

While a full regional split is not provided, Karnataka is identified as a significant market where delinquencies increased dramatically following the implementation of the Microfinance Ordinance in Q4 FY25. The bank operates through 753 branches with at least 25% located in Unbanked Rural Centres.

Profitability Margins

Profit After Tax (PAT) for FY25 was INR 726 Cr. For Q2 FY26, PAT stood at INR 122 Cr. Net Interest Margin (NIM) improved to 7.9% in Q2 FY26 from 7.7% in Q1 FY26. Return on Assets (RoA) was 1.6% for FY25 (dropping to 1.0% in Q2 FY26) and Return on Equity (RoE) was 12.4% for FY25 (dropping to 7.7% in Q2 FY26).

EBITDA Margin

Pre-provision operating profit (PPOP) for FY25 stood at INR 1,689 Cr. The cost-to-income ratio remained stable sequentially at 66.4% in Q2 FY26. Operating expenditure for FY25 was INR 2,793 Cr, driven by an 8% increase in staff strength.

Capital Expenditure

The bank invested in 500+ technology projects in FY25. Automation initiatives (51 processes) delivered productivity gains equivalent to 88,566 man-days, saving over INR 14 Cr. Analytics and data infrastructure investments produced INR 100+ Cr in incremental business and INR 4 Cr in cost reductions.

Credit Rating & Borrowing

CARE Ratings reaffirmed 'CARE AA-; Stable' for long-term bank facilities (INR 500 Cr), NCDs (INR 500 Cr), and Fixed Deposits (INR 10,000 Cr) as of March 26, 2025. The Cost of Funds remained stable between 7.5% and 7.6% throughout FY25, concluding at 7.6% in March 2025.

⚙️ Operational Drivers

Raw Materials

The primary 'raw material' for the bank is its deposit base, which stood at INR 37,630 Cr (up 20% YoY). Granular deposits account for INR 26,676 Cr (up 21% YoY). Cost of Funds (7.6%) represents the primary input cost.

Import Sources

Sourced domestically from a customer base of 95.1 Lakhs across India, with a focus on granular retail deposits which grew 21% YoY.

Key Suppliers

Not applicable as a financial institution; however, the bank relies on 95.1 Lakh depositors for its liability franchise and technology vendors for 500+ digital projects.

Capacity Expansion

The bank operates 753 branches as of FY25. It is expanding its secured book, which reached a 39% share of total advances in December 2024, up from 30% in March 2024.

Raw Material Costs

Interest expense on deposits is the primary cost. The Cost of Funds was 7.6% as of March 2025. The bank is utilizing liquidity buffers to support NIMs, which stood at 7.9% in Q2 FY26.

Manufacturing Efficiency

Productivity gains from automation equivalent to 88,566 man-days were achieved in FY25. The bank maintained a credit-to-deposit ratio of 84.9% (excluding IBPC).

Logistics & Distribution

Distribution is handled through 753 branches and digital channels. Staff expanded 8% to 24,374 personnel to support the growing network.

📈 Strategic Growth

Expected Growth Rate

35%+

Growth Strategy

The bank aims to achieve 35%+ growth in its secured book by focusing on Affordable Housing, Micro Mortgages, MSME, and Gold Loans. It is also leveraging its new AD-1 license to enter the foreign exchange industry and using customer lifecycle analytics to increase product penetration.

Products & Services

Microfinance loans (JLG model), Affordable Housing loans, Micro Mortgages, MSME loans, Vehicle Finance, Gold Loans, Agri loans, Current and Savings Accounts (CASA), Fixed Deposits, Insurance products, and Foreign Exchange services.

Brand Portfolio

Ujjivan Small Finance Bank.

New Products/Services

Obtained AD-1 business license for Foreign Exchange services. New products include Gold Loans, Vehicle Finance, and Agri loans, with secured disbursements growing 78.8% YoY in Q2 FY26.

Market Expansion

Welcomed 9.1 Lakh new customers in FY25, reaching a total of 95.1 Lakhs (11% increase). Expansion is focused on increasing the secured loan mix to 50% of the total portfolio.

Market Share & Ranking

Ujjivan is the third largest small finance bank in India.

Strategic Alliances

Partnerships for insurance product penetration to generate non-interest commission income. Collaborates with IDRBT for cybersecurity drills.

🌍 External Factors

Industry Trends

The SFB industry is shifting toward secured lending to mitigate microfinance volatility. Ujjivan's secured mix increased from 30% to 39% in one year. Digital innovation is a key driver, with Ujjivan executing 500+ tech projects to maintain competitiveness.

Competitive Landscape

Competes with other Small Finance Banks and NBFC-MFIs. USFB is the 3rd largest SFB, navigating sector-wide stress through asset diversification.

Competitive Moat

Durable advantages include a 20-year track record in microfinance (since 2005), a strong granular deposit franchise (INR 26,676 Cr), and a robust digital stack. These are sustainable due to high switching costs in banking and deep rural penetration (25% of branches in unbanked areas).

Macro Economic Sensitivity

Highly sensitive to microfinance sector stress and regional legislative actions (e.g., Karnataka Ordinance). Credit costs totaled 2.45% of the Average Gross Loan Book due to sectoral challenges.

Consumer Behavior

Increasing demand for digital banking and secured credit products like housing and vehicle finance among the underserved segments.

Geopolitical Risks

Not disclosed as a primary risk, though the bank monitors global threat landscapes for cybersecurity.

⚖️ Regulatory & Governance

Industry Regulations

Adheres to RBI SFB Licensing Guidelines: 75% of Adjusted Net Bank Credit to priority sectors; 50% of loans < INR 25 Lakhs; 25% of branches in Unbanked Rural Centres. Follows Basel III capital requirements.

Environmental Compliance

The bank received an 'Outstanding' ESG Impact Rating with a score of 76 for Environment, 84 for Social, and 83 for Governance.

Taxation Policy Impact

Not specifically detailed, though the bank reports PAT of INR 726 Cr after all provisions and taxes.

Legal Contingencies

Impacted by the Microfinance Ordinance by the Government of Karnataka, which caused a dramatic increase in delinquencies in Q4 FY25. The bank maintains a zero-tolerance policy toward regulatory breaches.

⚠️ Risk Analysis

Key Uncertainties

Ongoing stress in the microfinance sector (61% of book) could further elevate credit costs, which were 2.45% in FY25. Slippages increased to 3.6% in 9MFY25 from 2.3% in FY24.

Geographic Concentration Risk

Significant exposure to Karnataka, where legislative changes impacted repayment behavior. The bank is mitigating this through micro-market analysis and regional diversification.

Third Party Dependencies

Conducts outsourcing risk assessments and thematic reviews to manage vendor dependencies.

Technology Obsolescence Risk

Mitigated by 500+ annual technology projects and the creation of a comprehensive data lake to disseminate insights.

Credit & Counterparty Risk

Gross NPA (GNPA) stood at 2.2% in FY25 but increased to 2.68% by December 2024 due to microfinance stress. The bank uses 'Guardrails 2.0' (tightened credit norms) to manage acquisition quality.