Management Comments
Good evening ladies and gentlemen. This is our first earnings call after we got listed so that really was the highlight for the last quarter. I think we complied with the licensing condition of listing the bank and as you know the IPO was hugely successful oversubscribed 101 times. Now, obviously the next set of things we are required to do is to also find out a way of diluting the promoter shareholding, which after the IPO has now been reduced to 83.3%.
So we would need to bring it down to 40% and we have stated this in the past that we would like a reverse merger but we have to yet start that dialogue with RBI. In addition to that we would also be examining multiple other options of bringing down the promoter stake and after the IPO because we have our promoter shareholder lock-in of one year we have enough time at our hands to examine all kinds of options and I think we would be sharing those details within due course with all of you but we are working very seriously on examining all the options.
Coming to the quarter that went by Q3, I think we had a fairly good quarter, we had remarkable set of numbers considering that some of the challenges that we did face especially in microfinance business, in some parts of the country, I think we have come out stronger and we have maintained the levels of growth that we displayed in the first two quarters. I am sure you have gone through the numbers. Our Y-o-Y disbursements were very healthy at 18% and the book grew by 46%. I do not want to go through the numbers because I am sure you have access to the numbers right now, so I rather focus on what our thinking is and what we are planning to do.
We did have some bit of slowdown in micro banking and that was a cautious stance on our part. It was a deliberate strategy. We were watching whole lot of incidences that were around folding especially in Assam and I will cover Assam in a little more detail just in a couple of minutes. But I think, because we kept our focus on lot of other things like efficiency, our investments in technology which we have done over a period of time we have been able to improve our NIMs, which have sequentially improved from 10.5% in Q1 to 10.9% in Q3 and our cost to income ratio, which we have earlier guided at 72% for this year, we are within that for the first nine months we are at 69% and for this quarter we are at 71%. Our credit quality continues to be very robust. Our GNPAs were at 0.9% and NNPAs at 0.4%. Our PAR has obviously increased because we did had the issue in the Assam, which again I will cover in a little more in detail but we have also just to be on the conservative side ,have provided for about 5 Crores for an Assam portfolio. We also continue to focus on making sure that our customers use our digital applications and as you would know our mobile app is now in nine languages so we are making a very conservative effort in user head option and focusing on digital transactions which have gone up from 16% in the last quarter to 25% and the same time last year I think we were around 8%.
We have also been able to reduce our turnaround time for most of our lines of businesses so in an effect, I think we have retained our sharp focus on efficiencies and cost optimization wherever we had a chance to and at the same time keeping a very sharp eye on our portfolio qualities. Now coming to Assam I think the background all of you are aware but just to set the context I think we did see first Assam was partially impacted by floods in the first half of the year. Subsequently, we did have some protests in Upper Assam largely against the microfinance institutions largely to do with collection and over lending and this led into a kind of larger organized protests against these institutions so we had kind of looked at the Assam market almost a year ago and we also believe that there were some overheating happening on those parts, so on our part we had slowed down. We were anyway very cautious and just to let you know our portfolio in Assam is barely 3.5% and you know in the impacted areas, the areas where the protest was going on the Upper Assam area it is 1.5%. We have only 7 branches out of those 574 that we have at the moment. So while it was a small portfolio for us, I think we are still maintaining a very cautious stance, we are not adding new customers, we are servicing our existing customers and at the same time we are working very closely with the local administration, the state government, with the MFIN, and with the rest of the people and the industry and we are trying to come to an early resolution which we are very, very hopeful that we would be able to, but at the same time we have also provided for another 5 Crores for just the Assam portfolio in this quarter.
Our repayment base on a cumulative basis are at 98%, so that also tells us that things are actually improving on a daily basis and we see that on the ground but despite that I think we will maintain a bit of a cautious stance in Assam and like I said earlier we are hoping that we will get to an earlier resolution on this whole issue. Now coming to the assets and liabilities side of the business, I think we continue to diversify our asset book so our non-microfinance book is now 22% largely driven by affordable housing. We are seeing good demand in affordable housing. We are going to be adding more branches that we have in our network offering affordable housing to offer that through branches and we would be covering most of our branches in the next few quarters.
We are also going pretty healthy in the MSE side. We are only doing secured MSE and both these books are going on a pretty healthy basis for us and the GNPAs are completely under control. On the deposit side, deposits grew by 98% Y-o-Y and the share of retail deposit now is about 43%, our branches are now fully operational the one that we have planned for this financial year, so with 574 branches now kicking in we are getting very good traction on retail deposits and on CASA. Our CASA ratio is steady at 12% and it has started to move up and on our part we are focusing on the mass market like we have stated earlier in a lot of other calls and our media interactions that Ujjivan’s purpose is to serve the mass market, within the mass market which is the lower income group or the aspiring middleclass as we call it, we have for now identified about seven segments and these seven segments are the youth, the senior citizens, the salaried workers, small traders and retailers, the smaller institutions and our micro banking customer and their family and also to an extent the marginal farmers in our rural branches. Now with this round of focus our approach is that we are going to, all these customers with all kinds of banking products that we have to offer right now and I think we have the complete set of products and services which are required for these customer segments and to support that we are also investing in enhancing our tech capabilities, our analytics capabilities and also making sure that we have a good relationship-ownership program which is a combination of how we on-board customers, how we maintain their transactions and the relationships with us, also through very high levels of service quality. We are very confident that our deposit base like we stated earlier is going to be very broad based and granular. We also introduced digital savings and digital fixed deposits in the last quarter. They are doing extremely well for us and we are seeing extremely good encouraging results both in terms of new customer on-boarding as well as the balances that customers are maintaining because we are focusing on making sure that customer transact through these accounts and just over a period of time becomes very primary relationship so that we have the ability to sell other products also.
On the other asset products, we are still in the pilot stage of testing personal loan for the salaried employees as well as vehicle finance. In vehicle finance we are largely positioning ourselves for the two-wheeler and the three-wheeler segment and we also want to dominate the electric three-wheeler mobility and to that extent we have signed MOUs with the electric vehicle manufacturer. We are getting very good reception from the manufacturers as well as the dealerships and in the next year we have plans to scale up the vehicle finance business in a very methodical manner continuing our focus on the mass market because we believe that these vehicles will eventually be used for livelihood and not so much on the aspiration side so we want to cater to the same segments that we have identified on the deposit side. That said a few things were mentioned about you know how you are looking at future? So we do want to focus on predominantly three or four things, the first one is to build a strong liability franchise because now we have the network in place, we have the teams in place, we have the technology in place and all the branches have been opened in the right sort of markets, we will also continue with branch expansion in a more calibrated manner, we are yet to finalize the plans for next year’s branch expansion we would share that with you as and when we are ready to, but we do want to keep a very diversified liabilities portfolio and over a medium term we want all our assets to be funded by deposits and to the extent of about 75% to 80% being funded by retail deposits. We also expect our CASA to go to 25% in the medium term, right now we are at 12% and because we are focusing on granular stable CASA we do expect that to take a little longer because we are not going after the hot money so to say or large chunky CASA deposits where we may not have control on the average balances. At the same time our commitment to stay invested in technology and bringing out new ways of using technology I will just cover that in a couple of points. So firstly I think our technologies are contemporary we do not have any legacy issues. Our API stack is completely ready and we are just putting our framework in place and that has going to give us an opportunity to expand our digital ecosystem with a good number of partnerships and the ecosystem players and the platform companies and we do expect like the way we have tested our digital savings and FDs, we do expect a fair amount of scale to come from our digital capabilities through our API banking practice that we are unfolding now. We will continue to invest in analytics, we want to really expert ourselves in data science both on the credit side as well as on the marketing side and I think we will continue to focus on making ourselves more and more cost efficient. I think our cost to income ratio like earlier is about 72% for this year, but we actually hope to finish around 70% by the end of this year and then from thereon we are also hoping to be able to reduce it substantially year-on-year and come to a level where we are in a position to recalibrate it all over again.
We are also very optimistic about the mass market and I think we should spend a minute explaining why we think we are optimistic about the mass market. So there is a slide in the investor deck which tells you that the overall demographic, pictorial representation of India is changing from pyramid to more like a diamond and that is really because there are a lot more people who are coming from the bottom and joining the middle income group and by sheer number which is going to be a very large addressable market. We have also said that there is room for a lot of players, so we also believe that the industry on itself should be doing good job and should be able to grow and do a good task at serving these customers. On our part we stay committed to serving the unserved and the underserved and we also believe that because most people are banked but they are not necessarily served to that extent partially because that market which was served by NBFCs is kind of vacated right now to some extent we want to use this opportunity but at the same time we are also very extremely committed to our purpose of making sure that we stay focus on the mass market. With that I will conclude by saying that we will stay focused on creating a technology led mass market bank and continue to serve the unserved and the underserved.
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