Target: ₹42

CMP: ₹38.9

Ujjivan SFB hosted an analyst meet recently, in which it showcased the heads of the asset businesses, liabilities, credit and collections, and technology verticals. The management highlighted its plans to build a mass-market bank with a focus on the aspiring middle class. It also outlined its endeavour to diversify further into secured product segments while being confident about growth plans in the micro-banking business itself.

The underlying macroeconomic conditions continue to be favourable, which should help the bank report healthy return ratios.

Ujjivan SFB reported robust credit growth of 33 per cent year on year in FY23, led by the micro-banking segment. The management indicated that overall credit growth is likely to stay robust, with a guidance of over 25 per cent growth for FY24-26.

However, secured segments should drive growth, with a special focus on the affordable housing book. The management expects the share of secured loans to increase to about 40 per cent by FY26. The bank will also focus on gold loans, two-wheeler loans and micro-LAP as it looks to service the lifecycle needs of its customer base

We retain Buy with a Fair Value of ₹42 (₹36 earlier); prefer holdco over the bank (nearly 17 per cent holdco discount).