Exclusive: Microfinance will always remain a focus area for us, says Utkarsh SFB MD & CEO Govind Singh

Utkarsh Small finance bank MD & CEO Govind Singh attributed the high growth in other business verticals to their smaller base.

Varanasi (UP)-based Utkarsh Small Finance Bank (SFB) became the latest SFB to hit the stock market, with a stellar listing this month. The stock opened with a massive 60 percent premium on July 21 over its issue price.

The IPO recorded the second-highest subscription numbers after Ideaforge Technology in this current calendar year, subscribing 101.91 times during July 12-14.

Qualified institutional buyers (QIBs) were at the forefront, buying shares 124.85 times the allotted quota, followed by high net-worth individuals (HNIs) and retail investors who had bid 81.64 times and 72.11 times, respectively, of the part set aside for them. Employees, too, were aggressive in bidding, whose part was booked 16.58 times.

Analysts attributed the investor confidence to attractive valuations, healthy financials, improving asset quality, and reduced exposure to the unsecured micro-banking segment.

In an interview with Moneycontrol on July 27, Utkarsh’s Managing Director & Chief Executive Officer Govind Singh said microfinance will continue to be the core focus of the company, going ahead.

Singh attributed the high growth in other business verticals to their smaller base. He also spoke about the company’s ambition to convert to a universal bank over the next few years.

Edited excerpts:

Is there a plan to convert to a universal bank?

After 2-3 years, we will certainly look at that part. I think being a universal bank gives a few more benefits. This point can be deliberated by the board and by the management, and, then, we'll take a final call. We will just evaluate our preparedness a fair bit so that, in a year or so, we should be able to take a call.

Will the core focus continue to be microfinance?

So, microfinance will always remain a focus area for us. Other verticals, which we have created during the last 3-4 years, saw a higher growth rate because their base is small. It is also because our share in microfinance is coming down or our share in other asset classes has gone up. So, I think this trend of decline in microfinance and increase in the share of other asset classes, which we have started during the last few years, will continue.

What is the current employee headcount? Will you be adding this year?

Last year, we recruited more than 2,500 people. This year, the requirement seems to be lower because when you grow, some growth comes from productivity also.

So certainly, that will come, but overall growth will not be the way it was in the past few years in terms of recruitment. We have opened a lot of new verticals and branches in the last few years. The growth of manpower will be lower because of the ticket size increase and overall increase in productivity.

Does acquiring an MFI make sense to Utkarsh SFB?

No, we are not looking for any such inorganic growth through microfinance, at least as of now. We are largely in the central and northern Hindi belt, like Uttar Pradesh and Rajasthan. We are not in the South or East.

It's very important for us that we are very clear about microfinance, largely we intend to be in a place where we understand the local environment, culture, and geography. So that's very important and that's why we have not been going left, right, and centre to all the places and that thought process remains there.

Do you think Utkarsh can sustain the pace of business growth in a highly competitive market?

We have the benefit of being an older and a trusted player in some of the geographies. Overall, we have done well in terms of putting our teams in place during the last few years. This will make us grow there. We don't face any challenges in terms of competition because I think we have our niche area -- in terms of product suite. We don't see any challenge in the type of growth we have seen during the last few years. We will be able to sustain it easily.

What kind of growth are you looking at the end of the year?

Our last year's advances were 31 percent up from the previous year, and deposits were up 36 percent from FY23 and we opened almost 250 new branches during the last three years. We will keep it growing.