Ujjivan Small Finance Bank aims to raise ₹2,000 crore from QIP issue in 2 years; Check details

Ujjivan Small Finance Bank (SFB) is aiming to raise ₹2,000 crore in core capital in up to two years to fund growth plans, a top official said on Monday, September 8.

The microlender-turned-SFB also announced a slew of business plans, including expansion of branch network to 1,150 from the present 752, and a nearly three-times growth in loanbook over the next five years.

"We will be raising ₹2,000 crore capital in 18-24 months through the qualified institutional placement (QIP) route," its Managing Director and Chief Executive, Sanjeev Nautiyal, told reporters.

He said the stress in microfinance loans, which continues to remain a mainstay for Ujjivan's loan book despite de-growth because of concerns around the sector, is headed towards normalisation now.

"The pains are behind us; growth is around the corner for us," Nautiyal said, adding that stress levels have peaked in nine of the ten states and the industry will start showing growth in disbursements from now on.

Its overall capital adequacy as of June 30 had stood at a comfortable 22.77%, including the core buffers at 21.18%. As part of the 5-year plan, it is targeting to maintain capital buffer at 17-20%.

The SFB is aiming to increase the share of low-cost current and savings account deposits to over 35% by FY20, and get the net interest margin at 6-7%, he said.

With an eye on widening its revenue generation, the SFB is targeting to get into streams such as issuing bank guarantees, forex and also launching co-branding cards, he said, without specifying timelines for the same.

Its Chief Financial Officer Sadananda Kamath said the SFB's tech spends are over ₹250 crore per year, which includes ₹200 crore towards the "run" part of the business, while the remaining is towards newer initiatives.

The SFB, who's application for turning into a universal bank is pending with the RBI, will have to spend an additional ₹500 crore on technology initiatives if the central bank grants it a go-ahead, Kamath said.

Nautiyal said he is confident of bagging the coveted licence, given its credibility and track record, and reiterated that he expects a final call on the issue by the end of 2025.

He said there have been a series of exchanges with the regulator as part of the licence granting process and a panel of relevant senior officials will be taking a call on the matter now.

It can be noted that larger rival AU SFB had been recently granted an in-principle approval by the RBI to transition to being a universal bank within 18 months.

The SFB's MD said it sees no direct impact of US tariff moves as very few of its customers are in the export business.