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The market due to COVID-19 pandemic has corrected to a low of 7500 on Nifty from a high of 12500 in a month’s time. The unprecedented impact on the economy has left Dalal street bleeding. And similarly listed small finance banks such as Ujjivan SFBs and AU Small Finance Bank have also corrected more than 50% in the last 1 month. However, the impact of the meaningful correction on indexes has little effect on Unlisted Shares due to low liquidity. So, today we thought of doing quick research and comparison on various banking parameters to check how unlisted SFB i.e. Suryoday Small Finance Bank, is fairing among the listed giants.

1) The below data shows Loan book, Borrowing, Deposit, CASA, NIM, & G.NPA of FY18-19 and loan book growth of the last 3 years i.e. 2017,2018 & 2019. If we can see carefully, all the SFBs have enjoyed a healthy loan book growth in the last 3 years.

SFB Loan book Borrowing Deposit CASA NIM G.NPA
AU SFB 22,818 Cr 8613 Cr 19422 Cr 18.43% 5.50% 2%
Ujjivan SFB 10,522 Cr 4166 Cr 7379 Cr 10.63% 10.93% 0.92%
Suryoday FB 2711 Cr 1124  Cr 1593 Cr 11.20% 12.26% 1.80%

a) AU SFB is the giant among three SFBs. Having a loan book twice of Ujjivan and 8x to Suryoday SFBs.

b) CASA means a Current Account and Saving Account. Every bank dream is to have this number as large as possible of the total deposit because they need to give very fewer interest rates to these types of deposits. AU Small Finance bank highest CASA of 18.43% as compared to the other two.

c) Gross. NPA is quite manageable for all the three SFBs.

2)  Let us see now some of the valuation and profitability parameters. The share price as on 09.04.2020 is taken for calculation of P/B and Book value of 2018-19 is taken as reference. The unlisted price of Rs.350 is taken for Suryoda SFB. On comparison, we find that AU SFB despite correction from 750 to 496 in the last one month still trailing at P/B of 4.59 and costliest SFB among all

SFBs Book Value ROE Price P/B Mcap
AU SFB 108 13.10% 496 4.59 15097 Cr
Ujjivan SFB 11.09 11.21% 28 2.52 4995 Cr
Suryoday SFB 108 6.98% 350 3.2 2835 Cr

3) Branch and Employees data of all three SFBs. It is clear that AU SFB being the giant has more branches and loan/branch among all.

SFBs Branch Employee Loan/branch
AU SFB 572 12623 39.89 Cr
Ujjivan SFB 552 16776 19.06 Cr

4) Further, in the bank, the most important business parameter is to check, where they have given loans. And sectors to which bank has given loans are doing well or not. And to understand that, below is the loan profile of all three banks.

a) Suryoday SFB (FY2018-19)

Type of loan Ticket Size Loan given % size
Marginal borrowers 10k-50k 2189 Cr 81%
Commercial Vehicle 15-35 Lakh 218 Cr 8%
Secured Business loan 1 Lakh to 1 Cr 68 Cr 3%
MSME Loans 50k to 1 Cr 97 Cr 4%
FIG loans loan to NBFCs 48 Cr 2%

Their 81% of loan exposure is towards the small ticket size value of Rs.10k to 50k to marginal borrowers of the society and all this loan is unsecured. During this lockdown, marginal borrowers are most affected. We need to check how the bank cope up with this jolt in the coming quarters. With RBI given 3 months moratorium for all banks not to declare NPAs, the correct picture will emerge only after lockdown. The important factor we need to see how fast the marginal borrowers again get a job in the market.

b) AU Small Finance Bank (FY2018-19)

Type of loan Loan given % size
Vehicles Loans 9528 Cr 42%
SME&MSME 7708 Cr 34%
loan to NBFC 2511 Cr 11%
Secured Business loan 891 Cr 4%
Agri B/L 244 Cr 1%
Home & Gold Loan 165 Cr 1%

From the above, it is clear that AU SFB core business segment is Vehicles loans and the MSME sector. More than 75% of the loan comprises of these two items. With the logistics sector affected under lockdown, the impact will be seen in the Vehicle segment. The more clear picture will come in the next 2 quarters.

c) Ujjivan Small Finance Bank (FY2018-19)

Type of loan Ticket Size Loan given % size
Group Loan MF Rs.2k to 60k 7891 Cr 75%
Micro Individual Loan Rs. 51k to 2 Lakh 841 Cr 8%
Affordable Housing Rs.2Lakh to 50 Lakh 841 Cr 8%
MSME Rs.2Lakh to 50 Lakh 526 Cr 5%

The situation of Ujjivan SFB is similar to Suryoday SFB in terms of loan exposure to marginal borrowers of society. Their 82% of loan book falls under this category.

So, we can conclude that the valuation of all the SFBs is looking comfortable but the road ahead is not easy and finding impact at this juncture is very difficult.

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