I dont understand how Ujj financial shareholders were benefitted with SFB listing and what is future for the UF shareholders.
When they diluted 16% where did the funds go they should come to UFS the aprent co. but I see those are spent in SFB.
Please clarify. In future years if total more dilution happens where will the raised funds go ?? How will shareholders of UFS benefit.
Good set of Q3 numbers (Link)
Bank is very much focused on reducing cost to income ratio and tapping mass market segment with new offerings
Guys, assume if RBI were to allow USFB and UFSL merger in next 2 years, how till share prices work out?
Or
Q420 call rough notes
70 cr for covid provisions (0.75%): likely impact in delayed payments : 14k cr book
other microfinance guys have taken 1-1.5% of book
99% is under morortriumā¦
yields : 20%
PAR : 76 crā¦stable from
NNPA : 1.2% ; cover : 80% - highest PCR; coverage is 1.6%
growth 40-70% ?
CASA
digital improvement : betterā¦turnaround time for clients
11.5 months were good out of 12
5th best place to work in Asia
100% moratorium to micro banking customers
Got in touch with each customerā¦auto etcā¦msmeā¦70% of customers.
90 k custommers survey by occupaction
Rural economy to come back soonā¦given normal monsoonsā¦etc
borrowers can get to normal in 3-4 monthsā¦only disruptionā¦transportation, ā¦NO impact on underlying assets
we have spoken to 5 mn customers out of 5.4 mn customersā¦and hence feelā¦provisions is adequate
1/3rd ppl who paid usā¦paid digital
Deposits are stableā¦even after fall in rates
Top 10 depositors : 17-18%ā¦cooperative banks are big depostirs
morortorium: 31st Mayā¦we donāt thinkā¦customers will askā¦ as except red zones country normalising
center meeting not happeningā¦will need new way to meet clients.
its not possible to do door to door collectionsā¦
50 bps provision of total book: can it 3-4% lossā¦in microfinance portfolio ; we have seen past and spoken to customers
RBI .askedā¦to take 10% ON THESE MOROTTROIUM ACCOUNTā¦ THESEā¦WE HAVE TAKEN 38%
RED ZONE is 40% of portfolio ; 16% is green zone
Growth : no guidance. will be gradual . we are optimistic. mfi is mainly repeat business. will do contactless lending. and speaking to customersā¦they say its temporary disruption.
will not add pplā¦will bring efficiencies
we opened peopleās savings bank accountsā¦and customers are not dipping into those accounts
credit cultureā¦happens in wilful defaultā¦not in morotroiumā¦we have done in national calamity time
in housing financeā¦andā¦we have 40% LTVā¦our focus will be on our existing customersā¦
we are doing disbursements even today to repeat customersā¦we know who we are dealing with
Your NPA figure is wrong. GNPA is 1% and NNPA is at 0.2%. PAR is at 276 cr not 76 cr.
Q4FY20 CCT Notes
COVID
Provision - 70 cr COVID provision. Likely impact we expect from delayed payments. This provision is for customer who have a temporary disruption. Majority of customers can bounce back with 3 months of end of LD. From here on if more provision is needed we will do it on quarterly basis. Increased PCR from 65% to 80%. PAR at 276 cr. Total coverage is 1.6%.
Provision Rationale - Reviewed our performance in previous crisis, we assume that COVID is similar to other natural calamities where livelihoods are severely impact in the short term and the customers will resume a certain level of normalcy in 3-4 months after. But there is no damage to business asset or house. This is 2.5% of the portfolio (I am assuming she means impacted PF or the CCT is wrong and she said 0.5%).
Impact - Our survey suggests that <4% of MF customers (sample of 90k) say they will have a severe impact on their livelihood. (this is a disruption). will take 4-6 months to recover. This is like an extended national calamity that we have dealt with in the past.
BCP - Suspended operations 1 day before lock down. Had tested WFH before LD. Started preparing for business continuity in virus condition in 1st week of March. Started Janata connect from march 10th making customers aware of COVID. Had already contacted 2.5-3L customers before lockdown.
MORAT - Given opt out moratorium. 70% of MSE & housing, 100% MF, 60% personal loan and vehicle finance customers have taken moratorium. 90% by value and 99% by customers under moratorium.
Plan - We have 6 stakeholders, employees, customers, investors, our book, the society, regulators and then the industry, local authorities, government and media. We will plan with all the stakeholders in mind. We will prioritize employees and customers. Extended the COVID insurance to employees. Employees volunteered on their own to distribute rations, PPE kits, masks and help out locally.
Customer Connect - Have contacted our entire customer base. 50 lacs out of 52. Alternate to center, field meetings is to conduct it all on phone. This could be a good time to reinvent the entire model. We prioritized senior citizens when they called, we wanted to check their well being and see if they wanted help. Some employees went our and delivered groceries, medicines to customers because they needed help. 25% of customers said they are happy to take phone pe loan. 25% were ready to repay digitally.
Operations - 98% of branches are operational in all branch operations. 60% of branches are open with field operations. Have collected 80 cr since May 4th. Customers are paying themselves. We have asked them how much disruption they expect in months.
Sample Survey - Conducted survey of 90k-100k customers to find real impact on livelihood by occupation, market, income. This will help us revisit our credit policy. Most people have reported a reduction in the income and that is largely the 96%, the reduction in income to what extent it varies by occupation, by market size. On a sample of 90k customers, we have an idea of how much impact there is. It is what they are telling us. 50% of customers were in red zone.
Taskforce - High powered cross-functional focus groups of senior leadership was formed to undertake tasks of maintaining liquidity, fast tracking digital initiatives, maintaining deposit accretion, cost rationalization (renegotiating contracts), credit policy framework to identify early warning systems this time.
Digital product - loan on phone. for repeat cycle MF customer. Launched in jan-feb. Were going to try this in small scale, understand the workings and then scale up. Now in lockdown we have done extensive UAT. We are ready to launch to our entire base. 65-70% of our business is repeat loans. The ability to do this on a remote basis in an environment where we are not able to meet the customers face to face is very helpful. We needed the business to be contactless and we are bringing it out. Fixed a few tech issues in products on liability side and relaunched to select customers. Have setup network of customer acceptance for payment and other activities through a partner relationship. If we cannot go to the field meeting, we have an alternate model ready on phone, and on ATMs, mobile app in sometime. We will have these point very close to the customers. So we will not have to depend on field collections. We believe this will matter in the future as it is a good time to reimagine the entire business altogether. We saw alot of first time digital customers. It gives us confidence that there is acceptance and if we increase our acceptance points our customers will not find it very difficult to adapt/adopt these digital repayment methods. Today only 2% of customer pay digitally.
Repayment - We saw lots of customers come to pay on their own in April and may. 25% of those paid us digitally. Have collected nearly 80 cr from customers who were willing to pay on their own.
Best MF bank in India award by Asia Money.
Customer Profile - It is a misinformation that MF is hand to mouth. Most customers are in essential services, they have 2nd incomes, they are self employed and not on daily wages. We deal with clients who have been resident for more than 5 years. We do not deal with migrant populations, we deal with women and they are not the usual migrants. We focus on customers with multiple incomes. 50% are engaged in essential services which are groceries, dairy or provisions. 91% of rural customers are in agri related business and have not seen a demand shock. They are the 1st one that will recover. 1/3rd of the portfolio is rural by customer location. the customers that we deal with they cannot remain economically inactive for a long time, they are also not linked to the larger economy, they operate in local microeconomic ecosystems and to that extent their rebound is going to be far faster and far more resilient also.
Branches - We have 144 rural branches. Unlike others who have BC network.
Funds - Have taken some funds from SIDBI at much lower cost.
Q&A
Other players have taken 1-1.5% provision of book. We know our book, we know what is happening on the ground, we have contacted our customers. We have done the survey. Our PCR is 80% how is it low. We have spoken to 50 lac customers out of 52 lac.
20-25% customers did not want moratorium. But we gave 100% opt out as we could not take consent. We have an opportunity to re-imagine the business as a contact less model. We do not know how field operation after COVID will turn out.
Deposits - Deposits have been stable despite dropping the rates. We want our loan book to be funded by deposits and 80% of that from retail. Top 10 depositors are 37% FIG and 18% of total.
MORAT Extension - We do not see a need for that. LD 4 is only in containment zones. We are hoping that there would be gradual reopening which is what we are seeing in the last two weeks of our field operations also in our customer conversations if that happens most customers are already going back to some levels of restored economic activities so in our view it maybe not be necessary at all.
Collections - Door to door collection is not possible. Too much workload. We have new set of guidelines for center meetings, we have to be flexible. Regions have to take the call as per local situation. We have resumed field operation for 50% of branches from 4th May.
FIG MORAT - 10 out of 18 have asked for MORAT. But it is not uniform, some want for a month, some 2. Some only for interest. These are 40% of FIG book.
Employees - New lateral hires have been in focus aread. We are trying to flatten the organization structure.
RBI has stated is that we will have to take minimum provisioning of 10% on all the standard overdue cases and in comparison, we have taken 38%.
49 cr is SMA0/1/2 put together.
red zone is 40% of book, 16% is green by portfolio size.
No guidance for now. A large part of repeat loans will happen with contact less. We are optimistic. It will be a gradual build up. We are hoping it wonāt worsen.
OPEX - variable pay will be linked to collections.
Branch Expansion - Do not need branch expansion approval from RBI as per new SFB guidelines. They apply to old and new SFBs. The ground research work for expansion has been done as these decisions were made in Jan-Feb. It takes 3-4 months to decide on a location. We have halted the new opening for now and will revisit the decision in mid-year.
Collections - When we spoke to our customers during this whole lockdown period, we did clearly establish that there is going to be need for top-up loans or any kind of emergency loans after they come back so that is kept ready to offer these to our customers. Now as far as collections are concerned we are seeing a very healthy repayments given under present month even though everybody has been offered the moratoriums which gives us the hope that this will only improve in the month of June but hard to say that to what extent and what proportion we only know at the moment based on our conversation with customers that only 4% have said that they can be likely impacted, they have not said that they are definitely impacted and they will not be available pay us they have not said that. There is another way that we looked at it so we have opened accounts to all our customers as you know all our micro banking customers and we were encouraging them to use these accounts for emergency cash and deposits, the emergency cash that they normally keep at home and dip into that whenever they require. So, we were hoping that people will actually start withdrawing money from these accounts, we have not seen that happen to any great extent which would seem like that people are dipping into their savings also. So that makes us believe that it is a temporary disruption, it is not like that people are hand to mouth and they are really waiting for either credit or for some going into their savings so we are hopeful that collections will get restored but we still have to wait and watch till we are completely back on the field.
Impact of Moratorium on Credit Culture - Credit culture is not affected by moratoriums or any such repayment holiday we have done that in the times of natural calamity. We have not seen any adverse change in behavior. This happens when there is willful default and willful default is something that you can estimate some partly at the time of underwriting and partly during your regular interactions with customers. So, we do not have the reasons to believe that the credit culture gets spoiled because you will agree that there will be a demand for credit. Our LTV in MSME/housing is 40%. Focus on ST will be existing customers, we have room to give top up loans, will not grow new customers.
Drop in PSLC income is due to lack of attractive leads currently. We do this in 1st quarter of the year and maintain a buffer over 75%.
Corporate deposit as a % have dropped because they matured and we didnt renew because we already have surplus funds from IPO.
Hi, Greetings !! I have noticed reverse merger in Ujjivan finanical services annual report 2020
So againā¦reverse merger with holding company? how it is going to effect performace of stockā¦I am holding since 3 yrsā¦no return ā¦with -30 % lossā¦Dont know what to do with this stock. Please advise.
Mgmt in latest concall
The working group recommendations which were released yesterday
Does this mean the reverse merger will go through since UFSL doesnāt have any other group entities in their fold?
The next question to management if the interpretation is correct, is, at what valuation will the reverse merger happen?
Either
Will the shareholders of both companies get a vote on deciding whether to do the reverse merger or not in the first place?
If yes, will UFSL holding in USFB not get votes? The obvious conflict of interest, Related Party Transaction says they shouldnāt.
Where is the middle ground here?
it wont be pure holding company though. UFSL has itās own Business for which it is valued. SFB is a toppings on it. am i right here ?
Confirmation for my interpretation from a senior person
UFSL transferred its business to USFB. Subsequent to the transfer of business, as mandated by the RBI, UFSL got itself registered as a Core Investment Company (NBFC-NDSI-CIC).
āIts main objectives are to carry on the business of making investments in group company(ies) in the form of securities and providing guarantees etc. and to carry on financial activities, whether in India or outside, in the nature of investment in bank deposits, money market instruments (including money market mutual funds and liquid mutual funds), government securities.ā
83% of USFB is owned by UFSL. So in case of voting by shareholders the result is a no brainer.
I think a bonus share issue by USFB to USFL will be the way. A similar option was considered by equitas to reduce the dual listing value dilution for hold-co shareholders : https://www.business-standard.com/article/companies/equitas-holdings-likely-to-take-bonus-route-to-list-small-finance-bank-119080400817_1.html
After this step USFL will be absorbed into USFB.
Nitin chug on cnbc interview clearly mentioned that Giving out shares of USFB to UFSL shareholders is not tax efficient so they would go with reverse merger. Now, with reverse merge what would be swap ratio?
Giving shares directly is construed as a divident and so taxable. Share swap though achieves same purpose but does not attract any tax and only some legal and other costs
invested
Does it not mean that there is arbitrage opportunity hereā¦ USFBās 83% is almost 1.5 times of UFSLā¦ why is UFSL stock is not running away?
based on my limited knowledge - lot of things have to get right (they should)
So less about uncertainty and more about process getting executed and in parallel hold co discount will get narrowed gradually
