Dear Shareholders,

I am pleased to inform that FY 2023-24 has been another successful year in Ujjivan SFB's journey where we built on the base, we had formed in FY 2022-23. Our efforts have delivered tremendous results, including being awarded Best Small Finance Bank award at the BT Best Banks and NBFC Awards. The all-round growth reflects through robust business performance. Disbursements touched an all-time high with yearly disbursement at ₹ 23,389 Crores, resulting in 24% YoY growth in gross loan book to ₹ 29,780 Crores with secured loan book moving to 30.2%. Our deposits also grew substantially registering a growth of 23% YoY to ₹ 31,462 Crores with CASA ratio at a healthy 26.5% for period ended March 2024. We now serve 86 Lakh customers through our 752 branches spread across 26 states and UTs. These efforts helped us achieve the robust profitability of ₹ 1,281 Crores which translates into a RoA and RoE of 3.5% and 26.1% respectively, among the highest in the industry.

FY 2023-24 has been also a year of consolidation. While scaling new highs, we also have successfully completed the merger process between the Bank and its Holding company. I would like to highlight that the merger has benefitted all our shareholders. The Bank is one strong listed entity, merger has benefitted book value per share to increase by ₹ 2.6 to ₹ 29.

KPIs are Heralding a Movement in the Right Direction

This financial year was not just about growth numbers but the quality of growth which we were able to achieve. Our secured products grew faster leading to an increased share of secured products in overall portfolio in H2 FY 2023-24. This is currently led by Affordable Housing followed by Financial Institution Group. MSME vertical which was undergoing a transition during the year has also started to contribute, although the contribution will be more meaningful from FY 2024-25. Similarly on the deposit side the growth was driven by retail deposit which helped us bring down share of Bulk Term Deposits to 29.5 % of total deposit as on March 31, 2024 from 33.4% as on March 31, 2023. In first half of this year, we experienced shift of deposit from CASA to Term Deposit which brought our CASA ratio to 24.1% as on September 30, 2023 but in the second half we were able to bring it back to 26.5% as on March 31, 2024, due to our increasing focus in building a granular deposit base. Consequently, in CASA, the share of Current Accounts improved by ~150 basis points to 9.2% of total CASA.

What Did We Do to Achieve This?

Financial Year 2023 was a year of turnaround while financial year 2024 witnessed a lot of new initiatives:

ESG

Ujjivan SFB has started its journey towards sustainability as a reflection of its commitment towards Environment, Social and Governance (ESG) principles. The Bank’s inaugural ESG & TCFD reports was published in January, 2024. It is indeed a moment of pride when I mention, Ujjivan SFB is the First Small Finance Bank to launch Task Force on Climate-Related Financial Disclosures. We have outlined our targets for short, medium & long term across the material issues identified. The Bank has been aligning its business operations with the ESG requirements. We reflect a commitment to enhance financial growth and attain a future filled with sustainable growth for all. To infuse ESG considerations throughout its operations, the Bank has implemented a range of crucial policies, code of conduct, and guidelines that actively cultivate and uphold its commitment to responsible banking across the entire organisation. The Bank focusses on providing literacy training and capacity-building programmes to its customers. Ujjivan SFB prioritises social impact and measures success not in financial terms but in terms of positive social outcomes. We shall participate in the maiden DJSI (Dow Jones Sustainability Indices) assessment for our ESG Scores in FY 2024-25, by further enhancing transparency and efficiency, underpinned by strong governance framework involving Board of Directors and Management Committees.

Strong and Stable Board

The Bank has a strong and stable Board of Directors. The Board continues to steer the strategic direction for the Bank. We have received RBI approval for the appointment of Mr. Sanjeev Nautiyal as MD & CEO of the Bank with effect from July 01, 2024. He is a seasoned banker with over 3 decades of extensive strategic domain expertise in various business functions. Previously Mr. Nautiyal, held the position of 'Deputy Managing Director (Financial Inclusion & Micro Markets)' in SBI, handling Financial Inclusion & Micro Markets. Prior to this, he was MD & CEO of SBI Life Insurance. I believe he is a great addition to the Board and management. His knowledge and experience will lead Ujjivan to newer heights. Ms. Carol Furtado is elevated as an Executive Director of the Bank with RBI approval with effect from May 01, 2024. She is a key member of the leadership team that laid the foundation for Ujjivan SFB and has also been instrumental in setting up key business functions of the Bank. Her role has been instrumental in Ujjivan SFB’s recognition as a Great Place to Work.

Nurturing Talents Right

The Bank is committed to boost comprehensive people development and nourishing organisational capabilities. The listening and engaging culture of Ujjivan SFB has helped its employees flourish. Ujjivan SFB takes great pride to call itself an inclusive place to work and progress. We continued to remain in the Best Companies to

Work for in India as certified by Great Places to Work Institute for the 14^th year in a row. Wellness is always prioritised at Ujjivan SFB and we recently enhanced our employee health insurance programme to provide better health benefits for maternity, pre-natal/post-natal and IVF segments. Investment in talent upgradation and customer service enhancement has reaped benefits, which can be seen with the recognition gained by the awards for excellence in many spheres. Under the all-round skill enhancement philosophy, Ujjivan SFB has trained numerous employees. We constantly aspire to improve and perform better. This is visible through the rising average learning hours per employee spends in its upgradation. To ensure that employees are competitively compensated, a benchmarking exercise was undertaken. We also introduced a Car Lease Policy for employees. All these combined efforts helped us to get recognised as one of India’s Top 100 companies to work for, India’s Top 25 in the BFSI industry (amongst 167 participants) and Top 50 India’s Best Place to Work for Culture of Innovation.

Going Digital

The key to expand our customer base and reaching a diverse set of customers depends on increasing our physical reach but is equally rewarding when we embrace the digital journey to serve our customers better. We launched two digital liability products, Digital Fixed Deposits and Digital Savings Accounts during last year, which provides a seamless journey for our customers at their fingertips. This will enable us acquire customers beyond the reach of physical branches. The successful launch of our mobile banking application, Hello Ujjivan in FY 2022-23 grew strong with downloads surpassing 1 Million. Another key initiative was the ‘Micro Banking Loan Acknowledgement’ feature on the Hello Ujjivan platform for our repeat customers. With the introduction of this feature, in-branch visits are no longer mandatory to avail loans by our repeat customers. This has resulted in improved operational efficiency, enhanced customer convenience and reduced turnaround time. The app has already received a great deal of attention, winning the Skoch Award for Digital Transformation and the esteemed Aegis Graham Bell Awards 2023 for innovation in Consumer Tech and the Best Innovation Award at the BT Best Banks and NBFC Awards. On the infrastructure and governance front, Bank undertook several upgrades and rolled out new digital platforms, which are crucial for the smooth operation of our banking services. Our Phone Banking channel has aided the ease of banking, serving through 13 Indian languages and resolving customer queries, requests and complaints 24/7 with an uptime of 99.76%. Enhanced technological capabilities in various ‘straight-through processes’ were introduced, serving customers for their account-related transactions over phone. Happy to state that we achieved 76% ‘First Call Resolution’ through these initiatives which has developed trust among our customer base. We will continue to invest on both our internal and external digital capabilities. We will be introducing Digital initiatives such as smart statements, video banking, and WhatsApp banking for our customers. Furthermore, we aim to offer end-to-end digital services experiences to the customers in select areas. The Bank remains committed to continuously upgrading its application infrastructure, expanding digital banking services, and integrating more sophisticated security features to protect our systems and data. Our focus on innovation, security, and customer experience will guide our efforts as we navigate the evolving digital landscape.

Machine learning and artificial intelligence is playing a meaningful role in banking business. Adopting usage of data analytics has led the Bank on path of transformation. Our teams are leveraging the advantages of this technology improving overall efficiency and effectiveness within the Bank’s digital ecosystem. Through data analytics, the Bank has gained insights to facilitate well informed decision-making and effectively cross-sell and up-sell the products to our large customer base. Our continuous efforts in this area have resulted in early recognition as the ‘Best Data Science Team of the Year (Small Finance Bank)’ from the Data Analytics and AI show.

FY 2023-24

Financial year 2022-23 was an exceptional year for the Bank, setting the benchmark for the financial year 2023-24. I am delighted to share that we were able to deliver on the high standards which we had set for ourselves. As I mentioned earlier, the Bank disbursed ₹ 23,389 Crores for FY 2023-24 translating into y-o-y gross loan book growth of 24%. Secured products continued to outperform taking secured book share at 30.2% as on March 31, 2024. I foresee that we are working in line with our strategy and will be able to diversify our book to 40% secured book by FY 2025-26. Deposit grew at 23% y-o-y closing at ₹ 31,462 Crores as on March 31, 2024. Retail Term Deposits growth continues to outpace bulk term deposits, growing by 36% for the year.

With growing business, another important aspect for the Bank was to keep asset quality at healthy levels. Our asset quality improved significantly, with GNPA at 2.1% against 2.6% in FY 2022-23 and reflects the resilience of our customer segments and the robustness of our underwriting mechanism. Our Net NPA also remained at low levels throughout the year and closed at 0.3% as on March 31, 2024. We continue to have a strong and dynamic collection team which helped us maintain strong collection efficiency of around 99% through the year. This helped us contain our credit cost at 0.58%, well within our guidance of sub 100 bps. While the asset quality remains strong backed by robust collection, we saw the same moving towards normalisation this year and expects this normalisation to continue in next fiscal. We continue to carry the floating provision of ` 250 Crores on our balance sheet with a PCR of 87% as on March 31, 2024.

We registered a NIM of 9.1% for FY 2023-24. Margins remained under pressure from cost of funds which continued to inch up throughout the year and is also expected to remain elevated until the interest rate cycle reverses. There are 3 major factors which contributed to our margins:

The two interest rate hikes we took in the financial year 2023 propelled our yield on gross loan book to 19.2% from 18.4% in FY 2022-23 as the booked repriced. This helped us absorb a substantial portion of impact from rising CoF. This repricing will continue to benefit us in H1 FY 2024-25.

We started the year with high liquidity but tapered down the same during the year, this again provided impetus to NIMs. Additionally, our asset quality remained robust providing support to margins. We expect to maintain the margins at similar levels for FY 2024-25.

We will continue to expand our physical infrastructure by adding new banking outlets in FY 2024-25, increasing our customer touchpoints through partnerships with payment fintechs, introducing Money Mitra services along with other digital initiatives thereby amplifying our physical as well as digital presence.

Dividend Recommendation

The Board has recommended a final dividend of 15% for FY 2023-24, which will be subject to the approval of shareholders at the ensuing 8^th Annual General Meeting of the Bank, scheduled to be held on July 26, 2024.

Outlook

FY 2024-25 will be a good year in Ujjivan SFB’s Banking journey. Technology will be an important enabler for the Bank to scale newer peaks. Focussed product offerings being offered through multiple delivery channels. The Bank will also consider transforming itself into a Universal Bank with Mr. Sanjeev Nautiyal taking the leadership charge at the Bank.

Sincerely,

Mr. Ittira Davis

Managing Director & CEO