Ujjivan SFB surges over 2% after board approves sale of bad loans worth Rs 270 crore

So far this year, shares of Ujjivan Small Finance Bank have declined over 41 percent

Shares of Ujjivan Small Finance Bank surged over 2 percent to Rs 34.5 apiece on November 28 after board approved to sell its non-performing assets and written-off loans worth over Rs 270 crore to an asset reconstruction company.

"The bank has completed sale of stressed loan portfolio including written of loans pool with outstanding value of Rs 270.35 crore as on September 30, 2024, to an ARC pursuant to Swiss Challenge Method, for a consideration amounting to Rs 40.55 crore," the lender stated in an exchange filing.

Swiss Challenge method is a bidding process that enables private players to secure contracts from the government. This development comes at a time when the microfinance sector has been grappling with stress and overheating for much of the current financial year.

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In the recently concluded September quarter, Ujjivan SFB reported a mixed performance. The lender's net profit declined by 23 percent YoY while net interest income (NII) rose by 9.5 percent YoY. On the other hand, the bank's asset quality remained stable, with gross non-performing assets (GNPA) at 2.5 percent and net NPAs at 0.6 percent.

However, the management withdrew its earlier loan book growth guidance of 20 percent, citing uncertainties in the microfinance (MFI) segment. The NIM guidance was also revised downward from ~9 percent to ~8.6 percent, due to the shrinking MFI portfolio and expected reversals in interest income. As a result, the management retracted RoE guidance of 20 percent for the year.

So far this year, shares of Ujjivan Small Finance Bank have declined over 41 percent, significantly underperforming benchmark Nifty 50's 10 percent surge.

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