Our disbursements in Q3 and Q4 of this fiscal were the highest-ever for the Bank, leading to a 68% y-o-y growth in disbursements, and 20% y-o-y growth in gross advances for the year. MicroBanking and our retail businesses, MSE and Affordable Housing, contributed significantly to this growth.

Dear Shareholders,

The first half of FY 2021-22 was as trying as the last financial year, with global financial systems continuing to face a severe stress test. For India, the challenge was even more at the bottom of the pyramid, as multiple waves of the pandemic continued to disrupt economic activities.

Ujjivan SFB saw the asset quality worsening post COVID 2.0, led by lower income and higher provisioning, leading to losses in the first half of the fiscal. However, the Management acted rather promptly, and drew up recovery plans under the two ‘100-day plans,’ and executed them from September 2021.

Accomplishing Targets with the 100-day Plans:

The plans had three-pronged objectives: (a) rebuilding business volumes (b) improving asset quality and reducing credit cost, and (c) attracting good talent and stabilising our team.

Rebuilding Business Volumes
Our disbursements in Q3 and Q4 of this fiscal were the highest ever for the Bank, leading to a 68% y-o-y growth in disbursements, and 20% y-o-y growth in gross advances for the year. MicroBanking and our retail businesses, MSE and Affordable Housing, contributed significantly to this growth.

Overall deposits build-up was very strong, 39% to ₹18,292 Crores with credit-to-deposit ratio falling below 100% for the first time since we started operations. In line with our vision of attracting sticky deposits, we launched non-callable FDs called Platina FD, which helped us achieve growth of 30% y-o-y for Retail Term Deposits. Our CASA also showed tremendous growth of 85% y-o-y, taking the CASA ratio to 27%. This helped us achieve total growth of 59% y-o-y from retail branch banking.

Our cost of deposits continued to decline – 6.2% for March 2022 versus 7.1% for March 2021. Overall cost of funds for FY 2021- 22 was at 6.3%, down from 7.3% in FY 2020-21.

Improving Collections, Asset Quality
Focussed collection strategy was drawn to reduce slippages, and flow to higher buckets of PAR. This covered collections from all buckets, including the stress pool. We strengthened our collection team, added manpower, and also involved collection agencies. The results are heartening with gross NPAs reducing to 7.1% from 11.8% as of mid FY2021-22. We are maintaining a high provision coverage ratio of 92%, including a floating provision of ₹250 Crores, which provides a solid cushion for future earnings.

Building a Promising Talent Pool
As part of our 100-day plans, we also looked at strengthening our senior leadership team and stabilising our workforce morale. To address attrition, we took multiple steps like engaging with employees on one-on-one basis, and understanding their issues, and then addressing them. A fresh look was taken at employee roles and dissonance was addressed, wherever needed. An employee survey was conducted. Additionally, employee queries were addressed at regular open forums, which also enabled a direct connect with the senior management. Not only were we able to contain attrition, but we also attracted good talent. We hired senior leaders to expand our management bandwidth.

We have always prioritised the health and welfare of our employees. By the end of March, close to 100% of our staff was vaccinated. To further facilitate vaccinations, we provided reimbursement facilities for both, staff and their families.

Financial Performance

The year was marked by a strong comeback by Team Ujjivan as a an outcome of the two 100-day plans. However, the significant NPAs during most part of the year weighed heavy on our full-year income generation. The solid turnaround which was witnessed in the fourth quarter bodes well for our future performance.

Interest income in FY 2021-22 was up by 3% to ₹ 1,774 Crores led by 10% y-o-y growth in interest bearing assets, partly offset by lower yield. While NPAs as on 31^st March 2022 and 31^st March 2021 were at similar levels, NPAs during the fiscal were at elevated levels compared to last fiscal. This led to interest reversal and non-recognition of interest income for a large part of the portfolio. Consequently, the yield in the current fiscal was lower at 16.6% as against 18.5% in FY 2020-21. Our Net Interest Margin (NIM) stood at 8.8%, as against 9.5% in FY 2020-21.

Other income reduced from a year ago as the first half of the fiscal witnessed significantly lower disbursement, thereby impacting gross advances. This, coupled with regulatory changes, impacted PSLC income. Also, in FY 2020-21 there was a one-time gain of ₹41 Crores recorded under treasury on account of Open Market Operations purchase auctions conducted by RBI.

Our pre-provision operating profit dipped by 26% to ₹590 Crores from the ₹801 Crores in FY 2020-21. This was largely due to marginal growth in NII and higher expenses as we invested in collections and in rebuilding business volumes. The operating profit trend started to improve towards the second half of the fiscal. We undertook prudent provisioning of ₹1,118 Crores (net of bad-debt recovery). The reported net loss was ₹415 Crores as against a Profit After Tax (PAT) of ₹8 Crores in FY 2020-21.

We remained well-capitalised with high liquidity. Our capital adequacy ratio stood at 19% with Tier-I capital ratio of 17.7% and liquidity coverage ratio (LCR) of 152% as of March 31, 2022.

Power of Digital

Our focus this year was on stabilising the fintech ecosystem created last year, and co-creating innovative products. We retained focus on internal process automation with an addition of 20 more processes, automated through RPA and processing over 18 Crore transactions.

Team Spirit at Ujjivan SFB

We strive to create a work environment, where our employees feel appreciated, and this has been visible as our employees have voted us as a ‘Great Place to Work,’ for the 12^th consecutive year.

We have always prioritised the health and welfare of our employees. We are committed to creating a work environment that is nurturing and that encourages people to perform and realise their potential. As a recognition of their stellar performance, we granted ESOPs which benefitted almost 50% of our employees across all grades.

Acknowledging the tremendous stress caused by the external crisis and increasing work pressure caused by the pandemic, we offered facilities like doctor on call and employee counselling support. The health of our employees and their family members is one of our basic concerns and to ensure their wellbeing we organized extensive vaccination drives. By the end of March close to 100% of our staff was vaccinated. To further facilitate vaccinations, we provided reimbursement facility for both staff and their families.

Towards Community Welfare

In FY 2021-22, most of our CSR efforts were directed towards COVID-19 relief, helping hospitals and COVID care homes and working in harmony with government bodies in their states. Our reach extended to 8 COVID care homes, and 22 hospitals, covering ~3,80,000 citizens, 534 healthcare workers and 676 accredited social health activists (ASHA workers). We started Ujjivan Sanjeevani Kavach programme, which was primarily designed to vaccinate the community in our operational areas, and subsequently, had more than 80,000 beneficiaries.

Our community development programme, Chote Kadam, in partnership with Parinaam Foundation, carried out 5 civil projects in Karnataka, Goa, Rajasthan, and Gujarat for the benefit of the underprivileged communities. We have partnered with skill development NGOs towards the training and placement of youths and women in Maharashtra, Jharkhand, Odisha, and Bihar. We have also adopted an education centre in Chennai, which is run for children of Persons with Intellectual and Developmental Disability.

Outlook

The Bank’s leadership and management are constantly monitoring international and domestic situations, and are vigilant about safeguarding our interests. This year, we also plan to achieve minimum public shareholding, and return to regulators, for approval on reverse merger with our parent Ujjivan Financial Services Limited.

At Ujjivan, we are riding a wave of confidence that stems from consecutive quarters of strong disbursement and improving profitability. We have our sight on growing the platform further. During the current fiscal, FY 2022-23, we are looking to expand our physical presence across the country. Though we look to make a modest beginning with around 25 branches largely focussed on liability rich catchment areas. Physical reach would be supplemented by a strong and focused investment in digital platforms to grow our business volumes – assets and liabilities both, services, improve processes and overall reach to our customers. Our focus this year is to consolidate our businesses and make them profitable and invest in new avenues for growth. We expect strong growth in business volumes with leaner cost structure and better profitability. The risk to this guidance is the inflationary pressure that’s brewing up in the economy and the resultant rate hike movements. Also, we would be monitoring the global geo- political scenario. Overall, I see FY 2022-23 as a strong comeback year for Ujjivan which would create a solid platform for our next growth cycle.

Sincerely,

Ittira Davis
Managing Director & CEO