Ujjivan Small Finance Bank (Ujjivan) has a target price of ₹45 and a current market price (CMP) of ₹32.40. The bank’s successful scale-up of its retail portfolio and controlled growth in microfinance have contributed to its strong profitability, with a return on assets (RoA) of about 1%, making it potentially the highest among MFI players.
Despite a more than 50% quarter-on-quarter decline in profit after tax (PAT) to ₹100 crore, Ujjivan’s earnings have been impacted by an 8% quarter-on-quarter decrease in its microfinance book, a 6% drop in net interest income (NII), and a 3% increase in credit costs compared to the previous quarter. However, the bank’s secured retail book saw a robust 12% quarter-on-quarter growth, accounting for around 40% of total loans as of December 2024.
Ujjivan’s asset quality in its microfinance portfolio outperforms the industry average, and this is expected to sustain a return on equity (RoE) of over 14% in FY26–27. As a result, the bank has been upgraded to a Buy rating (previously Hold) with a revised target price of ₹45 (previously ₹36), valuing it at 1.25 times its estimated book value per share for September 2025.
Key risks for Ujjivan include lower-than-expected slippages and credit costs, particularly in the microfinance portfolio, as well as slower-than-expected loan growth, especially in the unsecured portfolio.
Published on January 27, 2025.
