Ujjivan SFB Q1: PAT triples to ₹317 Cr as provisions halve, NIM-led margins expand
PAT +206.7% YoY · revenue +25.08% · margins expanding
₹2,024.92 Cr
+25.08% YoY
₹316.54 Cr
+206.7% YoY
13.88%
+8.4pp YoY
₹1.63
Ujjivan Small Finance Bank reported standalone net profit of ₹316.5 Cr for Q1 FY27, more than tripling from ₹103.2 Cr a year ago (+206.7% YoY) and up 12.3% sequentially from ₹282 Cr. Total income rose ~22% YoY to ₹2,280.9 Cr, with interest earned up 25.1% to ₹2,024.9 Cr and basic EPS at ₹1.63 versus ₹0.53 a year ago. There were no exceptional or extraordinary items in either period, so the reported jump is the underlying jump — no adjustment needed.
Q1 FY-2027 vs prior quarters
The profit surge is overwhelmingly a credit-cost story. Provisions and contingencies fell to ₹127.3 Cr from ₹224.9 Cr a year ago as asset quality healed — gross NPA improved to 2.16% (from 2.52%) and net NPA to 0.34% (from 0.70%), with provision coverage at 84.7%. Pre-provision operating profit grew 52% YoY to ₹548.1 Cr, net margin (PAT/total income) expanded to 13.9% from 5.5% a year ago (12.9% in Q4), and operating margin held around 27% versus 22.3% YoY. Quarterly ROA of 0.53% (~2.1% annualised) ran ahead of the ~1.6% FY27 guidance.
The stock went into the print at ₹64.02, up 14.1% over the past month of trading.
For context: this is the highest quarterly PAT in the last 6 quarters on our records; PAT has now risen for 5 consecutive quarters; revenue is at a 6-quarter high.
Management guides for robust ~25% loan growth in FY27, driven by a strategic acceleration in the secured portfolio (~40% growth) to reach a ~56% mix, while calibrating microfinance growth to high single-digits. They expect Net Interest Margins (NIMs) to remain stable around 8.5% and credit costs to moderate to 1.4%-1.5
— This quarter: beat
The print validates the confident tone from the Q4 concall. Management had guided ~25% loan growth and credit costs moderating to 1.4–1.5%; per the July 2 business update the loan book grew 28.9% YoY to ₹42,903 Cr and deposits 25.1% to ₹48,307 Cr — both tracking or ahead of guidance — while credit costs clearly moderated. No published street PAT consensus for this quarter was locatable, so the beat is framed against the company's own guidance rather than a poll. Results were reviewed by joint statutory auditors Deloitte Haskins & Sells and Abarna & Ananthan with an unmodified limited-review conclusion; the bank publishes standalone results only. Capital adequacy stood at 20.36%.
W1
Credit cost sustainability: provisions ₹127.3 Cr this quarter vs ₹224.9 Cr YoY — watch whether the guided 1.4–1.5% credit cost holds through FY27
W2
NIM around the guided ~8.5% as the secured-portfolio mix shift toward ~56% progresses
W3
ROA vs the 1.6% FY27 guidance — Q1 annualised ~2.1% is running ahead; watch if branch/tech opex normalises it
Digital PDF, in Rs Lakh (converted to Cr). Bank format: revenue=interest earned; totalExpenses=interest expended+opex+provisions (127.32 Cr). No exceptional/extraordinary items either period. PAT surge is a credit-cost story (provisions 127.3 Cr vs 224.9 Cr YoY). Standalone only — no consolidated statement. Limited review, unmodified.
Beat loan growth & credit costs; opex deferred; deposit pressures & yield compression risks remain
The verdict, the claims that held up, the sharpest analyst exchanges, and the risks — the earnings call, decoded from the transcript.
Buy
confidence 7/10
Grade A
Beat loan growth, credit costs, CASA targets in Q1. Raised ROA and cut credit cost guidance. One quarter only; prior-year track record mixed on profitability targets.
Optimistic
next 1–2 quarters
Optimistic
multi-year
Q1 beat loan growth target (28.9% vs 25%) and halved credit cost guidance (0.9% vs 1.4-1.5%), with strong CASA mobilization. ROA guidance raised to 1.8-2%. But narrowing margins from yield compression (MSME 11.5%→10.5%) and rising deposit costs, plus macro risks (El Niño, crop delays), create near-term headwinds—sustaining ROA expansion requires flawless execution on deposit pricing and credit cost stabilization.
₹2024.9 Cr
Revenue · +25.1% YoY₹316.5 Cr
Reported PAT · +206.7% YoYFlat
Margins · vs guidance: CorroboratedDid the claims hold up?
Delivered 25% deposit growth, CASA up 37.8%, highest growth in couple years
METDeposits ₹48,129 Cr +25% YoY, CASA ₹12,930 Cr +37.8% YoY—both claims match reported data
Secured portfolio growing 42.7% to reach 56% mix by Mar-27
METSecured ₹21,638 Cr +42.7% YoY, now 50.4% of book—on track, 4.6 ppts to 56% target
Microfinance collection 99.7%, slippages down to 1.72% annualized from 2.68% Q4
METBucket X 99.7% confirmed; slippages 1.72% vs 2.68% prior—40% reduction validated
NIM stable at 8.5% despite deposit cost pressures
METNII ₹1,186 Cr, NIM 8.5% reported; cost of funds improved to 6.86%, supporting stability
Credit costs at 0.9%, beating prior 1.4-1.5% guidance, revising to 0.9-1%
METCredit costs ₹127 Cr = 0.9% of ATA; full-year guide revised down from 1.4-1.5%
ROA of 2.2% in Q1, raising FY27 guidance to 1.8-2% from 1.6%
METPAT ₹317 Cr yields 2.2% ROA; new FY27 guide 1.8-2% confirmed as +20 bps upgrade
Earnings quality
What changed since the last call
ROA guidance raised 1.6% → 1.8-2%
UpgradeDriven by credit cost outperformance (0.9% vs 1.4-1.5% prior) + deferred capex lowering FY27 opex. Upgrade materiality: +20 bps minimum.
Credit cost guidance cut 1.4-1.5% → 0.9-1%
UpgradeQ1 actual 0.9%; microfinance slippages dropped 40% QoQ to 1.72% annualized. Collection efficiency 99.7% across states. Materiality: ~60 bps better.
Opex guidance improved, capex spending deferred
UpgradeFY27 opex ratio now 6.4% ATA vs earlier higher plan. ₹250 Cr spend deferred from Q1 to Q2+. Benefit overstated (one-quarter timing gain); still material.
Asset growth maintained 25%, already beating at 28.9%
NeutralNo change to 25% FY27 guide but Q1 delivered 28.9% loan growth, suggesting upside or early-year strength.
NIM reaffirmed 8.5%, stable cost of funds
NeutralCost of funds 6.86%; deposit pressures acknowledged but alternative funding (IBPC, securitization, FCNR) available. No change to near-term NIM guide.
The Q&A
Analysts pressed hard on yields (affordable housing 12.2-12.3% hovering, not increasing), deposit cost trajectory, and funding strategy. Management answered with product-level data: affordable 12.5%, micro mortgages 19.5%, MSME 10.5%, backed by branch and ticket-size geography mix. On deposits, CRO emphasized deposit-growth alignment with assets, IBPC/securitization optionality, and deposit ratio targets (30% bulk, 30% CASA ratio). Tone defensive on some questions (yield sustainability, deposit cost) but not evasive—held firm on guidance with supporting numbers (99.7% collection, 1.72% slippages, 28.9% loan growth).
Asset yield competitive pressure — Renish Bhuva, ICICI
AnsweredAffordable housing yields 12.5% stable via geography/ticket-size mix (₹16-20L). Micro mortgages 19.5% healthier, 70% semi-urban. Not forced to compromise; geographies and ticket-size positioning maintain yields.
Gold loan customer acquisition — Renish Bhuva, ICICI
Answered100+ branches activated in gold loans in Q1 + increased MFI customer demand both drove acquisition. New business for us; late entrant benefit of understanding market nuances and building fit product.
Deposit cost inflation risk — Shreepal Doshi, Equirus
PartialDeposit growth aligned with asset growth. Have IBPC, securitization, refinance optionality. Marginal COF increase expected, baked into 1.8-2% ROA guidance. No very significant increase foreseen.
Vehicle finance expansion — Shreepal Doshi, Equirus
AnsweredPre-owned cars piloted in Karnataka, will test 2-3 geographies this year, scale next year. HCV/LCV only after FY27 once segment clarity achieved.
Capacity building spend timing — Rajiv Mehta, Yes Securities
Answered₹250 Cr capacity spend planned, minimal Q1 due to planning delays. Started June. Will build Q2-Q4. ROA guidance 1.8-2% already accounts. NIM stable via yields (gold, MSME offset COF) and alternative funding (IBPC, securitization).
CASA deposit strategy durability — Ashlesh Sonje, Kotak
AnsweredConfident of maintaining same CASA growth delivered this quarter. Whatever projected, very much committed or may over-deliver slightly on CASA ratio.
MFI portfolio post-stress stability — Kaushik Agarwal, Haitong
AnsweredBucket X 99.7% very healthy; slippages down to 1.72% annualized from 2.68% Q4. July trends same. 5-7 bps variance only marginal impact. No early warning signs; portfolio stable.
Micro mortgage portfolio aging risk — Pritesh Bumb, DAM Capital
AnsweredPAR 1.2%→1.5% not very significant. Bucket X 99.7-99.75% consistent 24 months. Book 3 years old, 18/24 MOB still small. Even mature books <2.5%. Quality solid, locations good.
MSME ticket-size migration strategy — Abhishek Murarka, HSBC
AnsweredConscious strategy to migrate up ticket curve. Yield + opex trade-off monitored. Opex decline doesn't fully offset yield drop but opex + risk together offset. Continue band this year; revisit next year.
Credit cost improvement driver — Sagar Shah, Spark
AnsweredSignificant slippage reduction (1.72% annualized vs 2.68% Q4). Bucket X 99.7% steady. Slippages down + collection up = better credit cost. Provisions held ₹657 Cr.
Guidance
FY27 loan growth 25% (Q1 tracking 28.9%)
HighBeat Q1; assuming moderation H2, 25% target easily achievable; may exceed
Secured portfolio to 56% by Mar-27 (now 50.4%)
High4.6 ppts gap; secured growing 42.7% YoY; on track, execution visible
NIM 8.5% stable (reaffirmed)
MediumMaintained Q1; cost of funds 6.86% improving; deposit pressures offset by higher-yield products (gold, micro mortgages); IBPC, securitization, FCNR available
₹250 Cr capacity building (branch, branding, tech, analytics)
HighDeferred from Q1, starting June; will build Q2-Q4; full impact in opex ratio 6.4%
Risks the call surfaced
Funding & liability cost
MediumRBI kept policy rate 5.25%; deposit market tight. Cost of funds 6.86%, improving but market pressure persistent. CRO acknowledged competitive intensity in CASA. If deposit rates rise faster than NIM guide, margin compression risk.
Asset yield & product mix
MediumMSME consciously moving up ticket size (LAP ₹58-60L→₹80-90L, WC ₹70-80L→₹1.1-1.2 Cr). Yield down from 11-11.5% to 10.5%. Trade-off: lower yield but lower opex and higher ROE via leverage. Long-term sustainability of 1.8-2% ROA depends on this holding.
Macro environment
MediumEl Niño strengthening; rabi harvest done but kharif sowing delay risk. MFI growth 16.8% YoY (high teens) but guidance high single-digits, suggesting slowdown expected. Agricultural distress could pressure MFI demand and collection rates.
New product execution
LowGold loans ₹1,020 Cr (+248.6%) rapid growth but from ₹300 Cr base. Pre-owned cars piloted only in Karnataka. Mid-corporate lending just commenced Q1. All unproven at scale; credit quality deterioration or market slowdown could derail.
Execution on capex spend
Low₹250 Cr capacity spend (branches, branding, tech, analytics) deferred from Q1 to Q2+. If further slippage or execution delays, Q2-Q4 opex and FY27 guidance impact material. Deferred spending creates artificial Q1 profit bulge.
Management
Score 8/10. Clear, detailed answers with specifics. Acknowledged deposit cost pressures, yield compression, macro risks without dismissing. Walked through product-level strategies with exact yields (affordable 12.5%, micro mortgages 19.5%, MSME 10.5%) and growth drivers. Transparent on capex deferral timing and rationale. Beat Q1 loan growth (28.9% vs 25%), credit costs (0.9% vs 1.4-1.5%), CASA (37.8%), collection (99.7%), slippages (1.72%). Raised ROA guidance to 1.8-2% from 1.6%. Single quarter only; prior-year ROA growth mixed; need sustained proof.
1 · Q2-Q4 FY27
₹250 Cr capacity spend (branch, tech, branding) ramps, normalizing opex ratio to 6.4%
2 · H2 FY27
Kharif crop sowing outcome—weather risk to MFI demand; macro test of collection stability
3 · Mar-27 end
Secured portfolio reaches 56% target; MFI slowdown execution validated
But narrowing margins from yield compression (MSME 11.5%→10.5%) and rising deposit costs, plus macro risks (El Niño, crop delays), create near-term headwinds—sustaining ROA expansion requires flawless execution on deposit pricing and credit cost stabilization.
Beat Loan Growth & Credit Costs; CapEx Timing Inflates Q1 Profit
Ujjivan beat loan growth and halved credit cost guidance in Q1, but reported profit is inflated by a ₹250 crore capacity spend shifted to Q2–Q4. The real story — and the real test — is sustaining ROA above 1.8% amid rising margin pressures.
₹317 Cr
+206.7% YoY
2.2%
inflated by ₹250 Cr capex deferral
1.8–2%
reflects full-year capex spend
Ujjivan's earnings look exceptional on the surface — PAT up 206.7% year-on-year — but the call reveals a timing story beneath. The bank deferred ₹250 crore in planned capacity spending (branch expansion, technology, branding) from Q1 to Q2 onwards, artificially suppressing Q1 opex and inflating reported profit. Strip away that benefit, and you find a solid but not exceptional organic quarter: the real story is the credit cost beat and loan growth beat, backed by concrete data (99.7% collection, slippages down 40%, loan growth tracking 28.9% vs 25% target), with guidance raised on ROA and deposit mobilization proving strong.
What actually beat — and by how much
Loan growth 28.9%, beating 25% FY27 guidance
SupportedGross loan book ₹42,903 Cr (+28.9% YoY). Already tracking well ahead of full-year target.
Credit costs 0.9%, halving prior 1.4–1.5% guidance
SupportedCredit costs ₹127 Cr = 0.9% of ATA. Full-year guidance revised down to 0.9–1%. Structural, not cyclical.
Deposit growth 25% YoY, highest in couple of years
SupportedDeposits ₹48,129 Cr (+25% YoY). CASA ₹12,930 Cr (+37.8%). Both claims match reported data.
NIM stable at 8.5%, cost of funds improved
SupportedNII ₹1,186 Cr, NIM 8.5% maintained. Cost of funds 6.86%. Confirmed despite ongoing deposit competition.
Secured portfolio tracking to 56% mix by Mar-27
SupportedSecured ₹21,638 Cr (50.4% of book, +42.7% YoY). On track; 5.6 percentage points to target by year-end.
Collection efficiency and slippages both strengthen
SupportedBucket X 99.7% confirmed; slippages 1.72% annualized, down from 2.68% Q4. 40% reduction QoQ validated.
What changed on this call — guidance revisions
ROA +20 bps — raised from 1.6% to 1.8–2%. Credit cost outperformance (0.9% vs 1.4–1.5%) and capex deferral improve FY27 opex ratio.
Credit cost −60 bps — cut from 1.4–1.5% to 0.9–1%. Microfinance slippages down 40% QoQ; collection at 99.7% structurally sound across all states.
Opex ratio to 6.4% ATA — improved from earlier plan. ₹250 Cr capacity spend deferred; H1 benefit will normalize Q2 onwards.
Loan growth 25% FY27 reaffirmed — but Q1 already tracking 28.9%, suggesting upside or front-loading. Guidance remains conservative.
NIM 8.5% reaffirmed — stable despite deposit cost pressures and tight market liquidity. IBPC, securitization, FCNR (₹60 Cr mobilized Q1) provide funding optionality.
The bull-bear ledger
Loan growth beat (28.9% vs 25%) on back of secured portfolio acceleration (+42.7% YoY); mix shift on track
Credit costs halved; microfinance slippages down 40%, collection at 99.7% — structural improvement, not cyclical bounce
CASA franchise strong (+37.8% YoY), highest deposit growth in 2 years; targeting 30% ratio sustainability
Q1 PAT inflated by ₹250 Cr capex deferral; underlying organic profit materially lower than reported
Yield compression in MSME deliberate strategy (11.5% → 10.5%) to chase higher volumes; opex savings don't fully offset yield loss
Deposit cost inflation ongoing; NIM stability depends on rigorous COF management and product mix discipline
Macro headwinds: El Niño, kharif crop delay risk to MFI demand; H2 FY27 is a real test of 99.7% collection hold
New products (gold loans, pre-owned cars, mid-corporate) still early-stage; rapid growth from small base not yet validated at scale
Market positioning — how the street is reading this
The market approved Q1 with a day-1 pop of +2.82% (delivery 42.6%), a solid endorsement of the print. However, the stock is priced for near-perfection: trading at ₹71.57, only 2.12% below its all-time high of ₹73.12, up 51.28% from its 52-week low of ₹47.31. Momentum is overbought (RSI 74.8), and the stock sits above its 20-day, 50-day, and 200-day moving averages. Institutionally, FII ownership rose 1.78 percentage points (now 17.23%) and DII rose 2.45 percentage points (now 31.13%) in the most recent quarter — both are adding, a sign of confidence — but the stock's positioning leaves little room for disappointment. Any failure to deliver on the 1.8–2% ROA guidance, or a miss on deposit cost management or credit quality, could trigger a sharp pullback from these levels.
Risks ranked by severity to a holder
Deposit cost inflation accelerates faster than NIM guidance assumes
MediumRBI repo at 5.25%; liquidity tight. Management guided only 'marginal' COF increase. If deposit rates rise faster, NIM compression accelerates and the 1.8–2% ROA target misses.
Yield compression from MSME upmarket migration proves unsustainable
MediumMSME yields down from 11–11.5% to 10.5% due to conscious ticket-size migration. Management says opex offsets, but if higher-ticket MSME shows credit deterioration or competitive yield pressure intensifies, ROA expansion stalls.
El Niño / kharif crop failure impacts MFI demand and repayment
MediumMicrofinance is ~50% of portfolio. A crop failure or agricultural distress in H2 could pressure both demand and collection rates, despite today's impressive 99.7% bucket X collection.
CapEx execution slippage into Q3–Q4 extends opex drag into FY28
Low₹250 Cr spend deferred; if further slippage occurs, FY27 opex ratio benefits extend and FY28 normalizes higher, creating an earnings miss surprise in next year.
New products fail to scale or show credit deterioration at higher volumes
LowGold loans +248.6% from ₹300 Cr base; pre-owned cars only piloted in one state; mid-corporate just started. Unproven at scale; if credit stress emerges, growth targets miss.
The debate
1 · Q2–Q4 capex spending pace and opex ratio normalization
₹250 Cr capacity spend expected Q2 onwards. Monitor quarterly opex spend and the path to 6.4% ATA guidance. If execution slips or opex normalizes higher than guided, FY27 ROA forecast falls short of 1.8–2%.
2 · Kharif crop sowing outcome and MFI collection trend
H2 FY27 is a macro test. If kharif sowing delays or agricultural stress emerges, MFI collection efficiency (today 99.7%) could deteriorate. This is the single largest risk to the credit cost guidance (0.9–1%) holding.
3 · Secured portfolio progress toward 56% target by Mar-27
Currently 50.4%, target 56%. Execution on mix shift validates diversification strategy away from MFI concentration. Track quarterly progress; if it stalls, ROA expansion is constrained.
4 · Deposit cost trend and NIM sustainability in Q2–Q3
Cost of funds 6.86% today. If competitive intensity in CASA/bulk deposits accelerates, COF rises faster than NIM guidance prices. Watch quarterly COF and NIM trajectory closely.
Ujjivan is a solid franchise with genuine credit quality improvement and deposit momentum. Q1 beat on the hard metrics — loan growth, credit costs, CASA, collection — is real and validated. But reported profit is inflated by capex timing, and margin pressures from yield compression and deposit cost inflation are structural headwinds that require disciplined management. The 1.8–2% ROA guidance is achievable but not a given.
The street has rewarded the quarter (+2.82% day 1) and the stock is up 51% from its low, now overbought and near all-time highs. Institutional flows are positive (FII +1.78pp, DII +2.45pp), but valuations leave no room for stumbles. The number to track from here is organic ROA — not the inflated Q1 2.2%, but the guided FY27 1.8–2% — and how management navigates deposit costs and yield pressures to sustain it. Hold for believers in the credit quality story; wait for a pullback for new entries.