The COVID-19 pandemic and lockdowns have put extreme stress within the microbanking sector with Ujjivan Small Finance Bank witnessing losses, a pointy rise in non-performing belongings (NPAs) and portfolio in danger and high-level resignations over variations in provisioning in opposition to unhealthy loans.
On Friday, the financial institution’s shares fell 19 per cent to Rs 19.70 on the BSE after it introduced the resignation of its MD & CEO Nitin Chugh on August 19. Every week earlier, Harish Devarajan had resigned as Additional Director (unbiased). This was preceded by the financial institution’s monetary outcomes for the quarter ended June 2021 when it revealed the deteriorating monetary efficiency. Earlier, B Mahapatra had stop as Chairman of the financial institution in February 2021 inside 10 months.
The financial institution, promoted by Ujjivan Financial Services founder Samit Ghosh, had began operations in February 2017. It reported a lack of Rs 233 crore for the June quarter when in comparison with a revenue of Rs 55 crore a yr in the past. What has upset the markets and analysts is the worsening asset high quality of the financial institution with gross NPAs capturing as much as Rs 1,374 crore (9.8 per cent of the advances) in June this yr from Rs 139 crore (1 per cent) final yr. Its portfolio in danger has gone as much as 30.8 per cent in June from 1.8 per cent final yr. It means as a lot as Rs 4,084 crore of its mortgage portfolio is in danger.
According to a board member of the financial institution, who didn’t want to be recognized, the issue began a yr in the past when Covid hit the nation and prospects reneged on repayments. “There was no adequate provisioning in the first two quarters of FY21. There were differences of opinion between the promoter (Ujjivan Financial Services) and the bank’s board on the issue of provisioning. The then Chairman, Mahapatra, quit. Then there was higher provisioning in the third quarter,” he stated.
“Things are now normalising. Collections have improved and the provision coverage ratio of 75 per cent is one of the highest in the sector and the bank is well capitalised at 26 per cent. The situation will be back to normal if the third wave doesn’t happen and the bank’s customers get vaccinated,” stated the director of the financial institution. Earlier this month, whereas saying the outcomes, Nitin Chugh, outgoing MD & CEO, stated, “The onset of the second Covid wave and consequent restrictions and lockdowns lashed the industry, especially the microbanking sector which faced a severe stress. Our business and collection volumes were affected due to the restrictions on movement, resulting in a subdued overall performance in Q1 of FY22.”
The financial institution’s share worth has fallen 56 per cent from its 52-week excessive of Rs 44.50 on the BSE.
The nomination and remuneration committee of the board of administrators final week appointed Samit Ghosh, former Ujjivan Financial MD Sudha Suresh, former Andhra Bank CMD BA Prabhakar and Ravichandran Venkataraman as further administrators with impact from August 20, 2021. While Prabhakar is tipped to change into the Chairman of the financial institution, Carol Andrade is anticipated to be appointed as Officer on Special Duty by the financial institution until a brand new MD & CEO is appointed, sources stated.
“The resignation of Chugh was a surprise to us. He was under a lot of pressure and the older team which set up the bank also left the bank,” stated an official of Ujjivan Financial Services, promoter of the financial institution. Samit Ghosh was earlier rejected by the shareholders for the put up of MD & CEO of Ujjivan Financial Services, however continues because the Chairman.
“Ujjivan SFB earnings were weak mainly led by a rise in delinquencies resulting in credit costs’ spike. Net interest income was marred by interest reversal driven by slippages. As many as 150,000 customers who were NPAs as of June 2021 started paying in July and saw overall upgrades of Rs 300 crore excluding restructuring,” stated a Centrum Broking report.
