Ujjivan SFB shares plunge over 7.5% after bank revised its loan growth forecast lower
Ujjivan Small Finance Bank fell 7.56% in today's intraday trade, hitting a 3-week low of ₹44.70 apiece after the management reduced the bank’s loan growth guidance to around 20% for FY25, down from the earlier guidance of 20%–25%. Additionally, the bank increased its credit cost guidance to 1.7%, up from the previous 1.4%–1.5%.This adjustment is due to increased stress in microfinance in certain hotspot states such as Punjab, Haryana, Gujarat, UP, and Kerala.
In response, the bank has decided to slow down disbursements (without a blanket ban) and increase its focus on collections.Also Read: SEBI crackdown on Quant MF: What is front-running?Management noted that the microfinance segment will face higher credit costs in FY25, primarily from Punjab, Haryana, Gujarat, and UP. Stress began building from Q2 FY24, leading the bank to proactively slow down loan growth in these identified hotspots.In Punjab and Haryana, the Karza Mukti Andolan in the districts of Amritsar, Jalandhar, Hoshiarpur, and Gurdaspur contributed to the stress.
In Gujarat, an influx of lenders led to a lack of borrower discipline, compounded by a slowdown in the diamond industry, reducing income levels.In UP, five out of the 29 districts where the bank operates its microfinance business saw credit costs rise above 2%, compared to an average cost of less than 1.5%, according to a domestic brokerage firm, Antique Stock Broking.Also Read: DCB Bank: MOSL upgraded this private bank to ‘buy’, sees over 23% upsideThe brokerage firm said that the slowdown in group microfinance loans will be compensated by robust growth in individual loans and the affordable housing segment. It said that the bank aims to increase the share of its secured book to 40% from the
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