ICICI Securities research report on Utkarsh Small Finance Bank
Utkarsh SFB (Utkarsh) has kick-started its lending journey in the states of UP and Bihar, and since inception (in FY10), it has developed strong demographic knowledge and built deep distribution network in these two states. We see Utkarsh’s deep presence in under-penetrated states (of total 75 districts only 7 districts have >20% credit penetration in UP), enhanced product offering, proven track record of managing asset quality better than peers (write-offs during covid at 12% vs 15-20% for MFI players) and its rapidly evolving liability franchise (steady decline in cost of funds) ensuring sustainability of >18% RoE and >25% growth over FY24-26E.
Outlook
While its credit market share in Uttar Pradesh stood at sub 42bps, within SFB space, its market share stands at 40% as on Dec’23. Maintain BUY with an unchanged TP of INR 70, valuing the stock at 2x FY25E BVPS.
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