ICICI Securities research report on Utkarsh Small Finance Bank
Utkarsh SFB (Utkarsh) kick-started its lending journey in the states of UP and Bihar, and since inception (in FY10), it has remained committed in establishing a strong niche in these states. Considering the under penetration in its core markets (Bihar’s top 5 districts covered 46% of overall credit, of which Patna alone contributes 29% share), with Utkarsh having a strong market share of 56% within SFBs (overall market share at 2%), the SFB is best placed to complement the Bihar growth story. This, coupled with its 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), ensure sustainability of >18% RoE and >25% growth over FY24-26E.
Outlook
Maintain BUY with an unchanged TP of INR 70, valuing the stock at 2x FY25E BVPS.
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