Further, investments to garner more low-cost deposits such as savings and current account would further add to the near term cost as benefits from these investments would not come immediately, opine analysts. Ujjivan’s efforts to have more share of low-cost deposits include family banking for micro finance customers, corporate interest banking, salary processing and cash management services, among others.
Yet, a likely strong loan book growth of 35-40 per cent in FY20 and better asset quality should restrict the overall cost impact. Also, Ujjivan is foraying into other non-micro segments such as vehicle financing, lowering dependence on micro finance business. Though existing customer base of about 4.6 million could give good push to the new products, lower yield on non-micro book could put some pressure on net interest margins (NIM). The management has guided for 10.5 per cent NIM in FY20, 60 basis points lower than FY19. Thus, stable margin is also a key for the Ujjivan’s strong long-term growth potential.
In the above backdrop, the stock is unlikely to see sharp upsides in the near term.