Ujjivan Small Fin Bank raises FY27 ROA guidance to 1.8-2.0% after strong Q1
Q1 ROA of 2.2% already tops the new range; management sees sustained growth via secured lending, but flags capacity spend and sector headwinds.
What's new
- FY27 ROA guidance raised to 1.8-2.0% from earlier implied level.
- Credit cost guidance revised down to 0.9-1.0% of avg total assets.
- Secured loans crossed 50% of book, reaching 50.4%.
- Deposit growth of 25% YoY, with CASA up 37.8% to ₹12,930 cr.
Themes from the call
Demand
Gross loan book grew 28.9% YoY to ₹42,903 cr, driven by affordable housing (+40.8%), MSME (+54%), gold (+249%) and vehicle loans (+85%).
Margins
NIM held at 8.5%; management expects similar levels for FY27 despite competitive yield pressure, aided by stable funding costs.
Capital allocation
FY27 capacity-building spend of ~₹250 cr for branches, tech and analytics; 144 new branches planned, with 38 already opened.
Guidance watch
- FY27 ROA raised to 1.8-2.0% (prepared, range, annual).
- FY27 credit cost revised to 0.9-1.0% of avg total assets.
- Secured loan share target of 56% by March 2027.
- Gold loan monthly disbursement exit of ₹250 cr by March 2027 (from ₹160-170 cr in Q1).
- Gold loan branch activation counts: ~575 vs 250 additional branches – discrepancy not reconciled.
Risk flags
- Gold loan branch activation target has two differing numbers – management did not explain the gap.
- Capacity-building costs of ₹250 cr will ramp after Q1, pressuring H2 expenses.
- Micro-mortgage PAR rose from 1.2% to 1.5% as the book matures.
- Sector risks: West Asia uncertainty, El Nino, tight liquidity, competitive pricing on deposits and yields.
Key quotes
-
"We are confident in raising our FY27 ROA guidance to 1.8% to 2.0%."
— Carol Furtado, CFO, prepared remarks -
"Deposits delivered the strongest growth in recent years, led by CASA at ₹12,930 crores."
— Management, Q1 FY27 concall summary
The brief
Ujjivan Small Fin Bank raised its full-year ROA guidance to 1.8-2.0% after a Q1 that delivered 2.2% — already above the top of the new range. The raise reflects confidence in the bank's pivot from microfinance to secured lending. The secured loan book crossed 50% of the portfolio for the first time, and deposit growth was the strongest in years, with CASA expanding 38%. Management also revised credit cost guidance lower to 0.9-1.0%. But the guidance range implies normalization from the Q1 peak. The bank plans to spend ₹250 crores on capacity in FY27, which will hit expenses from Q2 onwards. A discrepancy in gold loan branch activation targets — 575 by year-end versus 250 additional — remains unexplained. Sector risks including West Asia tensions, El Nino and tight liquidity temper the outlook. Ujjivan's guidance raise is credible after a strong start, but the real test is whether it can sustain a 2% ROA while absorbing capacity costs and competitive pressure.
Ujjivan's guidance raise is a vote of confidence, but Q1's 2.2% ROA is a high bar; watch cost and gold loan execution.