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26 Aug, 2025 12:21

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UFSL, subsequent to obtaining RBI’s approval for carry on business as SFB in Nov’2016, transferred its entire business to USFB and started banking operations in Feb’2017. • With 552 banking outlets, 441 ATMs and 16,776 employees, USFB provides products and services to 4.9 mn customers across 24 states and UTs. • Since holding company UFSL was the established micro financier serving unserved and underserved regions, 79% of the advances book compromises micro and small ticket loans. Avg. ticket size range from Rs2,000 to Rs200,000 per a/c with the maturity of up to 2 years. Micro loans provides yield ~22-24% thus helping the bank to maintain NIM over 10%. Surprisingly, these are unsecured loans, delinquency remained under control because of the cautious lending approach adopted by the bank. Micro loan book grew by a CAGR of 23% during FY17-FY19 which is moderate compared to over 40% growth for some micro financiers. USFB considers parameters like over-indebtedness and multiple borrowing before disbursing credit to customers. USFB maintained lowest GNPA (0.85% in H1FY20) among the SFBs and with NNPA at 0.33%, PCR stood at 61.2%.

With the diversified loan book across regions, healthy NIM, focus to expand quality loan book, stable assets quality with high PCR, USFB is the well managed SFB. Annualized ROE/RoA expanded to 19.4% and 2.5% in FY20. At the higher price band of Rs37, the issue is available at P/ABV of 2.5x which looks reasonable considering the fundamentals of the company. Listed peer AU Small Finance Bank is currently trading at P/ABV of 8.2x. Considering all these parameters, we assign “Subscribe” rating to the issue.

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