25th January, 2019

Strong Earnings growth Net interest income witnessed a stupendous growth of 33% in Q3FY19 to Rs288cr against Rs217cr in Q3FY18 mainly reflected due to 31% growth in advances. The PAT is reported at Rs45cr in Q3FY19 against Rs30cr in Q3FY18 led by 62% increase in fee and other income and 76% reduction in provision. Provision amount significantly reduced to Rs7cr against Rs29cr in Q3FY18. NIM has remained stable at 11.8% in Q3FY19 as compared Q3FY18. We expect 34% CAGR in NII and 27% CAGR in loan book over FY18-21E.

Robust growth in loans & deposits Advances and deposits grew by 31%/118% YoY in Q3FY19. Contribution of deposits in total borrowings profile increased from 35% in Q3FY18 to 58% in Q3FY19 and resulted in reduction of borrowing costs. Deposit grew mainly on account of newly added full-fledged banking outlets which stood at 464 in Q3FY19 against 367 in the last quarter. Loan disbursements grew by strong 31% YoY. Out of 522 branches, 464 branches are converted into full-fledged banking outlets (added 97 in Q3FY19) which would help to mobilise low cost

deposits going forward.

Continues improvement in asset quality Asset quality improved with GNPA/NNPA at 1.4%/0.3% against 4.2%/1.0% on a YoY basis. Individual loan segment NNPA improved significantly from 2.3% in Q3FY18 to 0.4% in Q3FY19 and group loan segment NNPA reduced from 1.0% to 0.2% in the same period. The notable improvement in asset quality helped to reduce the provisioning by 76% in Q3FY19.

Valuations Long term outlook remains positive on the back of strong earnings coupled with healthy loan growth. However, mandatory listing of Small Finance Bank (SFB) and uncertainty on valuation of the SFB exists. Hence, we value the bank at 1.6x FY21E Adj. BV of 208.5 and recommend to Accumulate with a revised target price of Rs334.

RETAIL EQUITY RESEARCH

Ujjivan Financial Services Ltd.

Rating as per Midcap 12 Months investment period Banking/Finance

BSE CODE:539874 NSE CODE: UJJIVAN CMP Rs.296 TARGETRs.334 RETURN 13%

Bloomberg CODE: UJJIVAN: IN SENSEX: 36,195

Company Data

Market Cap (cr) Rs.3,511

Outstanding Shares (cr) 12.1

Free Float 100%

Dividend Yield 0.2%

52 week high Rs.435

52 week low Rs.167

6m average volume (cr) 0.22

Beta 1.54

Face value Rs.10

Shareholding (%) Q1FY19 Q2FY19 Q3FY19

Promoters 0 0 0

FII’s 38.4 36.8 37.1

MFs/Institutions 21.4 23.1 21.2

Public 39.7 39.6 41.3

Others 0.5 0.4 0.4

Total 100 100 100

Price Performance 3 Month 6 Month 1 Year

Absolute Return 63.0% -24.4% -26.9%

Absolute Sensex 8.5% -3.1% 0.1%

Relative Return* 54.4% -21.3% -27.0%

*over or under performance to benchmark index

Consolidated (Rs.cr) FY19E FY20E FY21E

NII 1,008 1,325 1,705

Growth (%) 43 31 29

NIM (%) 10.24 10.97 11.70

PAT Adj 179 266 360

Growth (%) 2358 49 35

Adj.EPS 14.8 22.0 29.8

Growth (%) 2358 49 35

P/E 19.9 13.4 9.9

P/BV 1.8 1.6 1.4

Adj. P/BV 1.9 1.6 1.4

ROE % 09.69 12.90 15.18

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Ujjivan Sensex Rebased

Q3FY19 RESULT UPDATE

Strong operating performance…. Ujjivan Small Finance Bank serves over 41 lakh asset customers through 522 branches and 14,305 employees spread across 223 districts and 24 states in India with Gross Loan Book stands at Rs9,350cr. It has over 464 full-service banking outlets with a deposit base of Rs5,362cr.

• Strong growth in Net Interest Income (Interest income less interest expense), by 33% YoY on the back of 31% YoY growth in advances.

• Reported a Net Profit of Rs45cr in Q3FY19 against Rs30cr in Q3FY18, mainly on account of increased other income and lower provisioning.

• Net Interest Margin (NIM) has remained stable at 11.8% in Q3 FY19 as compared to Q3FY18.

• GNPA improved to 1.4% and NNPA to 0.3% in Q3FY19 against 4.2% and

1.0% respectively in Q3 FY18.

• Deposit reached Rs5,376cr in Q3FY19, marking a 118% YoY growth.

• The long-term outlook remains positive on back of steady growth in loans

as well as earnings. However, the mandate to list the bank separately adds

concerns. Hence, we value at 1.6x FY21E Adj. BV and recommend to

Accumulate with a revised target price of Rs334.

•

Accumulate

Abijith T Cherian

Research Analyst

Quarterly Financials

Profit & Loss Account

(Rscr) Q3FY19 Q3FY18 YoY Growth (%) 9MFY19 9MFY18 YoY Growth (%)

Interest Income 470 358 31 1303 1021 28

Interest Expense 183 141 29 511 452 13

Net Interest Income (NII) 288 217 33 792 569 39

Fee and Other Income 42 26 62 138 100 38

Total Income 330 243 36 930 669 39

Expenditure 256 167 53 705 479 47

Provision 7 29 (76) 28 276 (90)

PBT 67 47 43 197 (86) -

Tax 21 17 24 62 (28) -

Reported PAT 45 30 54 135 (58) -

Adjustment - - - - - -

Adj PAT 45 30 54 135 (58) -

Diluted EPS (Rs) 3.7 2.4 54 11.1 -4.7 -

Change in estimates

Old estimates New estimates Change %

Year / Rscr FY19E FY20E FY19E FY20E FY19E FY20E

Net Interest Income (NII) 1,000 1,280 1,008 1,325 0.8 3.5

NIM (%) 10.9 10.8 10.2 11.0 -70bps 20bps

Fee and Other Income 183 263 181 231 -1.0 -12.2

Adj PAT 202 249 179 266 -11.4 6.8

Diluted EPS (Rs) 16.7 20.6 14.8 22.0 -11.4 6.8

Consolidated Financials

Profit & Loss Account

Y.E March (Rscr) FY17A FY18A FY19E FY20E FY21E

Interest Income 1,226 1,312 1,696 2,162 2,693

Interest Expense 543 605 688 837 988

Net Int. Income 683 707 1,008 1,325 1,705

Change (%) 35 3 43 31 29

Non Int. Income 124 132 181 231 288

Operating Income 807 838 1,190 1,556 1,994

Change (%) 38.2 3.9 41.9 30.8 28.1

Pre Prov. Profit 349 184 232 330 449

Prov. &Conting. 75 311 107 98 102

PBT 322 12 263 391 529

Change (%) 18 -96 2124 48.7 35.1

Tax 114 5 84 125 169

Tax Rate (%) 35 38 35 35 35

Reported PAT 208 7 179 266 360

Adj* 0 0 0 0 0

Adj PAT 208 7.3 179 266 360

Change (%) 17.2 -96.5 2357.7 48.7 35.1

No. of shares (cr) 12 12 12 12 12

EPS (Rs) 17.4 0.6 14.8 22.0 29.8

Change (%) -36.7 -96.5 2357.7 48.7 35.1

DPS (Rs) 0.6 0.0 0.6 0.6 0.6

CEPS (Rs) 18.3 4.0 19.5 27.6 36.9

Balance Sheet

Y.E March (Rscr) FY17A FY18A FY19E FY20E FY21E

Cash and cash eq 760 594 745 607 346

Loans &Advances 6,007 7,626 9,950 12,631 15,695

Investments 1,448 1,233 1,033 733 333

Current assets 78 87 108 138 172

Gross fixed assets 100 168 243 328 425

Net fixed assets 75 123 156 190 216

Intangible assets 64 76 60 45 29

Def. Tax (Net) 47 76 68 57 41

Total assets 8,479 9,814 12,120 14,399 16,831

Deposits 106 244 6,166 9,288 11,789 Debt funds 2,839 3,657 3,259 2,267 1,758 Other liabilities 3,727 3,865 368 160 145 Provisions 51 286 393 491 593 Equity capital 119 121 121 121 121 Reserves& Surplus 1,636 1,640 1,812 2,072 2,424 Shareholder's fund 1,756 1,762 1,934 2,193 2,545 Total liabilities 8,479 9,814 12,120 14,399 16,831 BVPS (Rs) 147.0 145.7 160.0 181.4 210.6 Change (%) 24.2 -0.9 9.8 13.4 16.1 Adj. BVPS 147.2 141.4 157.5 178.9 208.5

Ratios

Y.E March

FY17A

FY18A

FY19E

FY20E

FY21E

Profitability & Return Ratios

Interest yield (%) 24.42 19.53 19.47 19.31 19.17

Cost of funds (%) 10.61 8.95 8.07 7.98 7.87

Net int. spread (%) 11.80 10.58 11.40 11.33 11.30

NIM (%) 11.03 8.77 10.24 10.97 11.70

ROE (%) 14.06 0.41 9.69 12.90 15.18

ROA (%) 2.6 -0.2 1.6 1.9 2.2

Asset Quality

GNPA (%) 3.69 3.60 1.32 1.17 1.05

NNPA (%) 0.03 0.70 0.30 0.24 0.16

Loan growth (%) 16.5 27.6 30.5 26.9 24.3

Valuation ratios

P/E (x) 17.0 489.6 19.9 13.4 9.9

P/BV (x) 2.0 2.0 1.8 1.6 1.4

P/ABV (x) 2.0 2.1 1.9 1.6 1.4

Recommendation Summary Dates Rating Target

16-March-2017 Buy 520

11-May-2017 Buy 415 09-August-2017 Buy 391 07-November-2017 Buy 426 15-February-2018 Accumulate 413 14-May-2018 Buy 470 4-September-2018 Accumulate 399 20- November-2018 Accumulate 249 25-January-2019 Accumulate 334

Source: Bloomberg, Geojit Research

Investment Rating Criteria Large Cap Stocks; Mid Cap and Small Cap;

Buy - Upside is above 10. Hold - Upside is between 0- 10. Reduce/ Sell - Downside is more than 0.

Neutral - Not Applicable

Buy - Upside is above 15. Accumulate - Upside is between 10 - 15. Hold - Upside is between 0 - 10. Reduce/Sell - Downside is more than 0. Neutral - Not Applicable

To satisfy regulatory requirements, we attribute ‘Accumulate’ as Buy and ‘Reduce’ as Sell. The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock always carries the risk of being upgraded to BUY or downgraded to a HOLD, REDUCE or SELL. Neutral- The analyst has no investment opinion on the stock under review.

General Disclosures and Disclaimers

CERTIFICATION

I, Abijith T Cherian, author of this Report, hereby certify that all the views expressed in this research report reflect our personal views about any or all of the subject issuer or securities. This report has been prepared by the Research Team of GeojitFinancial Services Limited, hereinafter referred to as Geojit.

COMPANY OVERVIEW

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We have prepared this report based on information believed to be reliable. The recommendations herein are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. The stocks always carry the risk of being upgraded to buy or downgraded to a hold, reduce or sell. The opinions expressed are subject to change but we have no obligation to tell our clients when our opinions or recommendations change. This report is non-inclusive and does not consider all the information that the recipients may consider material to investments. This report is issued by Geojit without any liability/undertaking/commitment on the part of itself or

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Geojit Financial Services Ltd. (formerly known as Geojit BNP Paribas Financial Services Ltd.), Registered Office: 34/659-P, Civil Line Road, Padivattom, Kochi-682024, Kerala, India. Phone: +91 484-2901000, Website: www.geojit.com. For investor queries: customercare@geojit.com, For grievances: grievances@geojit.com, For compliance officer: compliance@geojit.com. Corporate Identity Number: L67120KL1994PLC008403, SEBI Stock Broker Registration No INZ000104737, Research Entity SEBI Reg No: INH200000345, Investment Adviser SEBI Reg No: INA200002817, Portfolio Manager: INP000003203, Depository Participant: IN-DP-325-2017, ARN Regn.Nos:0098, IRDA Corporate Agent (Composite) No.: CA0226

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Geojit’s Associates consists of privately held companies such as Geojit Technologies Private Limited (GTPL- Software Solutions provider), Geojit Credits Private Limited (GCPL- NBFC Services provider), Geojit Investment Services Limited (GISL- Corporate Agent for Insurance products), Geojit Financial Management Services Private Limited (GFMSL) &Geojit Financial Distribution Private Limited (GFDPL), (Distributors of Insurance and MF Units).In the context of the SEBI Regulations on Research Analysts (2014), Geojit affirms that we are a SEBI registered Research Entity and in the course of our business as a stock market intermediary, we issue research reports /research analysis etc that are prepared by our Research Analysts. We also affirm and undertake that no disciplinary action has been taken against us or our Analysts in connection with our business activities.

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Further, the Analyst confirms that: (i) he, his associates and his relatives have no financial interest in the subject company (ies) covered herein, and they have no other material conflict in the

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