Ujjivan’s This autumn was operationally weak, with a Rs 750 million curiosity reversal impacting PPOP (-22% q-o-q), which was considerably beneath our expectations. Ujjivan managed to stay barely worthwhile for FY21, with no provisions in This autumn (Rs 250 million reversal) regardless of a Covid-19 wave-2 influence in addition to comparatively giant wave-1 residual stress, and thru value cuts (partly unsustainable). We had been significantly negatively stunned by giant NPAs throughout all segments (GNPA: MSE – 10.3%, reasonably priced housing – 3.6% and MFI 7.8%), which highlights that drawback isn’t restricted solely to MFI.
Total stress ranges stay excessive with 1) PAR 30-90 of 4.4%, 2) non-NPA restructured guide in MFI of 6.6% (some overlap in PAR), 3) Internet NPA nonetheless elevated at 2.9% (PCR of solely 60%). Additional, the wave-2 influence shall be giant given the depth/unfold and lack of help measures given earlier – assortment effectivity has seen 300-600 bps declines throughout segments in Apr-21. We therefore suppose Ujjivan is clearly not out of the woods but and decrease PPOP/AUMs of ~4% will prohibit its means to soak up such a big influence.
We anticipate ROEs of 4% in FY22F with credit score value of 425 bps (525 bps together with Rs 1.7 billion of provision buffer). We minimize our PAT estimates for FY22F/23F by 65%/15% pushed by decrease development and better credit score value. We downgrade Ujjivan to Impartial with a lowered TP of Rs 240 (1.3x FY23 BVPS vs 1.5x beforehand) with draw back in opco (honest worth of Rs 26 for financial institution) and adjusting for a 20% holdco low cost.
Asset high quality – nonetheless not out of the woods: GNPA% inched as much as 7.1% (4.8% in 3Q), with GNPAs in MFI/ MSE/ housing at 7.8%/ 10.3%/3.6%. 60% PCR stays low (65% in MFI) particularly on condition that ~7% of MFI guide is restructured and PAR 30-90 is 4.4% (general). Stress stays elevated throughout segments with PAR>0 at 16%/23%/10% for MFI/MSE/ Housing.
Additional, collections in April point out 300-600 bps declines throughout portfolios, with MFI declining to 88% from 94% in Mar-21, and Could will presumably see an additional decline.
Surprisingly, collections in MSE (secured) are decrease than in MFI, giving a lot much less consolation on the brand new segments into which Ujjivan has entered.
Additional, with solely INR1.7bn of provision buffer, we predict FY22F shall be one other 4-5% credit score value yr.