ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 8 August 2019 | 1

Current Reco : HOLD 1QFY20 RESULT REVIEW

Previous Reco
CMP
: HOLD
: INR278
Ujjivan Financial
Target Price : INR296 Strong growth, but other challenges remain
Potential Return : 7% Quarterly performance - lower opex shores profits
https://www.euromoney.com/Brokers n AUM growth YoY = 51%
Asiamoney Brokers’ Poll 2019
https://www.euromoney.com/Brokers
https://www.euromoney.com/Brokers NII growth YoY = 41%
P Vote for ANTIQUE
https://www.euromoney.com/Brokers
https://www.euromoney.com/Brokers
n
https://www.euromoney.com/Brokers
https://www.euromoney.com/Brokers n PPoP growth YoY = 91%
Voting closes on 16th August
https://www.euromoney.com/Brokers
n Profits growth YoY = 79%
Digant Haria
+91 22 4031 3422 n NIM level = 10.9% in Jun19 vs. 12.8% in Jun18
digant.haria@antiquelimited.com n GNPA = 0.8% in Jun19 vs. 0.9% in Mar19
Bhavik Mehta n CASA share = 6.7% in Jun19 vs. 6.5% in Mar19
+91 22 4031 3397
bhavik.mehta@antiquelimited.com Analysis of result
Vidhi Shah While asset growth was strong, margin adjustments have started owing to larger proportion
+91 22 4031 3467
vidhi.shah@antiquelimited.com
of non-MFI portfolio. Operating cost was lowest in many quarters, driving record profits. The
current quarter saw sharp improvement in C/I run-rate at 66%, which was mainly due to
Market data benign income and some cost saving initiative, however management is still guiding C/I to
Sensex : 36,691 stands at 73 - 75%. Asset quality trends remains healthy for now.
Sector : NBFC
Migration to small finance bank
Market Cap (INRbn) : 33.8
Market Cap (USDbn) : 0.477 With the branch role out plan coming to an end in Q3FY19, focus has now shifted to scaling
O/S Shares (m) : 121.4 up retail deposit which has increased from INR42mn to INR55mn per branch. Ujjivan's
52-wk HI/LO (INR) : 407/167 strategy around retail term deposits would be to offer higher interest rates while strategy
Avg Daily Vol ('000) : 4,907 around savings deposits would be to offer complete package of debit card, app based
Bloomberg : UJJIVAN IN support and better segmental targeting.
Source: Bloomberg
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19
Valuation
Bank Branches 187 275 367 464 474 474
FY19 FY20e FY21e
EPS (INR) 12.4 16.2 26.0 CASA per branch - Inr mn 7.4 8.7 10.3 12.1 16.5 17.4
P/E 22.4 17.2 10.7 Retail Deposit per branch - Inr mn 15.5 18.6 25.5 29.8 41.2 55.2
P/BV 1.8 1.6 1.4 CASA+ Retail TD as % of total borrowing 5.6 9.6 15.4 21.0 22.9 28.0
RoA (%) 1.3 1.2 1.6 Source: Company, Antique

RoE (%) 8.3 9.9 14.1

Source: Company, Antique
Long term view - Few more battles before glory
Returns (%) While it's heartening to witness the strong revival in asset growth, scale up in liabilities and
1m 3m 6m 12m progress on the cost front remains important variable to watch for. Although Ujjivan follows
Absolute (5) (10) (3) (28) best-in-class processes when it comes to microfinance, pockets of over-leveraging are already
Relative 3 (7) (2) (26) visible in this space and it won't be easy for a pan India player like Ujjivan to remain totally
Source: Bloomberg insulated in case of any adverse event. Current valuations at 1.4x on FY21e book are
reasonable but re-rating will hinge on clarity around bank listing, management's ability to
Shareholding pattern
scale up its branch business and manage risks in MFI business. Maintain HOLD rating with
Promoters : - price target of INR296 per share.
Public : 100% Key financials (consolidated)
Others : - FY17 FY18 FY19 FY20e FY21e
Source: Bloomberg Net interest income (INRm) 6,831 9,054 11,995 16,867 21,505
Net Profit (INRm) 2,077 259 1,505 1,957 3,153
Price performance vs Nifty
% growth 17.2 (87.5) 480.1 30.1 61.1
120
EPS (INR) 17.4 2.1 12.4 16.2 26.0
100
80 BV (INR) 147.1 143.3 155.0 171.1 197.2
60 P/E 16.0 129.5 22.4 17.2 10.7
40 P/BV 1.9 1.9 1.8 1.6 1.4
Aug-18 Dec-18 Apr-19 Aug-19 RoA (%) 2.9 0.3 1.3 1.2 1.6
Ujjivan Financials NIFTY RoE (%) 14.1 1.5 8.3 9.9 14.1
Source: Bloomberg, Indexed to 100 Source: Company, Antique
ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 8 August 2019 | 2

Quarterly performance
INR million Jun-18 Jun-19 % YoY
NII 2,647 3,723 40.6
PPP 763 1,458 91.1
PAT 463 830 79.3

INR million Jun-18 Jun-19 % YoY

AUMs 77,870 117,830 51.3
Microfinance - Group loans 63,380 84,440 33.2
Microfinance - Individual loans 6,830 9,270 35.7
MSE 2,800 6,860 145.0
Housing 4,170 10,070 141.5

Jun-18 Jun-19 % YoY

Disbursements 20,730 29,580 42.7
Microfinance - Group loans 17,200 20,920 21.6
Microfinance - Individual loans 1,510 2,300 52.3
MSE 760 1,410 85.5
Housing 1,080 2,050 89.8

(%) Jun-18 Jun-19 bps

GNPA 2.70 0.80 (190)
NNPA 0.30 0.30 -
Cost - to - income 74.2 65.8 (842)
Source: Company, Antique

Concall highlights
On business performance
Seeing good traction in the microfinance business and is optimistic about it continuance for
FY20. In west bengal region not witnessing any challenges yet, however keenly monitoring
political unrest if any emanates. The initiative like renegotiating long term contracts, improving
productivity and reengineering some processes and supply management has lead to 10%
cost saving for Q1.
On separate listing of SFB
Lengthy approval time taken by regulators, resulting into deadline breach. High cost in form
of taxes and stamp duty in other options. Hence Ujjivan, to comply with RBI guidance of
reducing promoter holding and listing SFB, has narrowed down to issuing fresh equity in SFB
through IPO route. However, any swift development in Equitas Scheme of arrangement may
prompt them to take that route.
ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 8 August 2019 | 3

Financials
Income statement (INRm) Growth indicators (%)
Year-ended March 31 FY17 FY18 FY19 FY20e FY21e Year-ended March 31 FY17 FY18 FY19 FY20e FY21e
Interest income 12,258 15,070 19,265 26,578 34,605 AUMs 18.4 18.5 46.2 36.0 35.0
Interest expenses 5,427 6,016 7,270 9,711 13,099 NII 34.6 32.6 32.5 40.6 27.5
Net interest income 6,831 9,054 11,995 16,867 21,505 PPP 33.5 (29.2) (4.0) 53.3 53.8
Processing fees 776 78 265 397 536 PAT 17.2 (87.5) 480.1 30.1 61.1
Others 460 - - - -
Other income 483 299 606 910 1,092 Operating efficiency
Total income 8,549 9,431 12,866 18,173 23,133 Year-ended March 31 FY17 FY18 FY19 FY20e FY21e
Employee Benefits Expenses 2,716 3,734 5,405 7,459 8,951 Operating cost to income 53.6 70.2 79.0 77.2 72.5
Other Expenses 1,738 2,473 4,156 5,818 6,982 Operating cost to AUM 7.8 9.5 10.9 10.8 9.5
Depreciation and Amortisation Expense 126 414 606 758 833
Operating expenses 4,580 6,621 10,167 14,035 16,766
Asset quality
Pre provisioning profits 3,969 2,811 2,699 4,138 6,366
Year-ended March 31 FY17 FY18 FY19 FY20e FY21e
Gross NPA 164.4 2,721.6 956.1 1,460.1 1,986.0
Provisions and Write Offs 751 2,364 658 1,173 1,589
Gross NPA / On-Book AUM (%) 0.3 3.6 0.9 1.0 1.0
Profit before tax & exceptional 3,217 446 2,041 2,965 4,777
Net NPAs 17.6 529.2 318.7 730.0 993.0
Profit before tax 3,217 446 2,041 2,965 4,777
Net NPAs / On-Book AUM (%) 0.0 0.7 0.3 0.5 0.5
Current Tax Expense 1,141 339 372 1,008 1,624
Credit Cost 1.3 3.4 0.7 0.9 0.9
Profit after tax 2,077 259 1,505 1,957 3,153

Balance sheet (INRm) Return ratios

Year-ended March 31 FY17 FY18 FY19 FY20e FY21e Year-ended March 31 FY17 FY18 FY19 FY20e FY21e
RoA 2.9 0.3 1.3 1.2 1.6
Share Capital 1,194 1,209 1,212 1,212 1,212
RoE 14.1 1.5 8.3 9.9 14.1
Reserves and Surplus 16,359 16,110 17,565 19,522 22,675
Tier 1 16.8 23.7 17.2 14.2 12.0
Networth 17,558 17,321 18,777 20,734 23,887
Borrowings 62,914 38,528 45,830 45,503 48,148
Margin analysis (%)
Deposits 1,064 37,726 72,592 102,499 150,436
Year-ended March 31 FY17 FY18 FY19 FY20e FY21e
TOTAL 84,786 95,224 140,259 173,169 228,235
Yield on loans 16.9 16.7 16.7 20.0 19.5
Fixed Assets 1,398 1,984 2,845 3,129 3,442
Cost of borrowing 10.0 8.5 7.5 7.4 7.4
Goodwill on Consolidation - - - 5 5
Spread 6.9 8.2 9.2 12.6 12.1
Deferred Tax Assets (Net) 470 920 759 759 759
NIMs 9.4 10.1 10.4 10.9 10.8
Cash and Cash Equivalents 7,601 6,131 10,973 14,791 16,192
Investments 14,467 12,441 15,478 7,400 7,943
Other operating details
Loans 58,712 73,226 109,305 146,006 198,600
Year-ended March 31 FY17 FY18 FY19 FY20e FY21e
Other Non-Current Assets 298 163 246 295 354
AUM 63,795 75,600 110,490 150,266 202,860
Other Current Assets 782 360 653 783 940
On-Book AUM 58,712 75,600 106,230 146,006 198,600
Short-Term Loans and Advances 839 - - - -
Off-Book AUM 5,083 - 4,260 4,260 4,260
Long-Term Loans and Advances 220 - - - -
Borrowings 65,042 76,255 118,422 148,002 198,584
TOTAL 84,786 95,224 140,259 173,169 228,235
Interest earning assets 85,862 94,172 136,941 172,457 226,995

Per share data Source: Company, Antique

Year-ended March 31 FY17 FY18 FY19 FY20e FY21e

No. of shares 119.4 120.9 121.2 121.2 121.2
EPS 17.4 2.1 12.4 16.2 26.0
BVPS 147.1 143.3 155.0 171.1 197.2
ABVPS 146.9 138.9 152.3 165.1 189.0
Source: Company, Antique
ANTIQUE STOCK BROKING LIMITED FROM THE RESEARCH DESK 8 August 2019 | 4

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