The capital raised by Ujjivan Small Finance Bank, estimated at about ₹750 crore in its upcoming initial public offering (IPO), will be used for business expansion, including for branches and digital technology, and will see the bank through for a couple of years. In an interview with BusinessLine , Nitin Chugh, President, Ujjivan SFB , who will take over as Managing Director and CEO from December 1, says that there continues to be good demand for credit amongst small-ticket borrowers, especially for sectors like affordable housing. Edited excerpts:

How has the move from HDFC Bank to Ujjivan SFB been?

It is not a sudden move, it was planned and well thought through. It feels great to be working for an organisation which is very aspirational and focussed, very purpose-driven and clear about the customer segments we want to focus on. So, I am very excited about it.

What are your expectations from the IPO?

Expectations will be decided by the market. We are going through this activity as there is a requirement to list an SFB within three years of operations; so we are complying with that. The capital that we raise will be good for us for the next couple of years as we are growing our business very rapidly.

What will the bank use the capital for?

It will be used for business. We have 552 branches as on September end. But we need to scale up our businesses as most of our business lines are relatively new, except for micro-finance which has been there for 15 years. We will be investing in growing our business and in digital technology.

How do you see Ujjivan SFB amongst its peers?

All SFBs are doing well. I think, we are amongst the best for a variety of reasons — in terms of size we are in the top three. We are the lowest in terms of credit cost and quality. In terms of distribution and network, we are the most widespread, as we are present in 24 States and one Union Territory. We have a sizeable number of branches.

Is the bank looking to further expand its geographical presence?

We are in 24 States and one Union Territory but probably less than half of the districts of the country. We have a view on which all districts we should go into and also widening and deepening our presence in existing markets. So, expansion will obviously continue to happen.

The Reserve Bank of India had made certain observations on the bank...

It was reported recently as we made it a part of the DRHP. But it is a voluntary disclosure by us as we need to be in good order for the DRHP. Those were observations for the first year of Ujjivan SFB which is 2017 and 2018. We have responded to each of the points reported in the media and have notified the stock exchanges too. We are absolutely right there and there is no concern.

How will the promoter shareholding be further diluted in the bank after the IPO?

The promoter shareholding will mostly come down to about 85 per cent after the IPO. We will get to know when we are closer to listing. After that we will have to look at the other requirement, which is to reduce the promoter shareholding to 40 per cent within five years and also the option of the promoter completely exiting. But I think we will want to plan for all this after we finish this transaction.

How do you see credit demand amongst small-ticket borrowers?

There is demand for small-ticket lending, small-ticket businesses, consumption loans, and loans for education. Micro-finance did not get impacted other than (at the time of) national calamities and temporary setback from demonetisation. Other than that, there is clear demand for good quality credit on the secured side. We are also clear there is good demand for affordable housing, which has not got impacted, and that is also our target market.

Are there concerns over repayment?

Our credit quality shows that. Our gross NPA was 0.9 per cent and net NPA was 0.3 per cent as on September 30, 2019. It is probably the best in the industry.

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