About Utkarsh Micro Finance(Core Invest) Unlisted Shares

Utkarsh Coreinvest Ltd. (erstwhile Utkarsh Micro Finance Ltd) is the promoting institution for 'Utkarsh Small Finance Bank'. Utkarsh Micro Finance Limited has started its operations way back in September 2009 to provide Financial and Non-financial services in its area of operations to the unbanked population who have the skill but are in need of capital.

The Micro Finance Business was converted into a Bank which started his journey with its incorporation on April 30, 2016. The Bank applied for a Banking Licence to RBI and Subsequently, the final license was received from RBI on November 25, 2016.

Terms and conditions of the license issued to Utkarsh Small Finance Bank Ltd to commence small bank business stipulate amongst others that the promoting entity (Utkarsh Micro Finance Limited) of the small finance bank shall be registered as an NBFC - Core Investment Company after the transfer of its business to the bank. In line with the conditions to the final license, the existing businesses of the Holding Company, Utkarsh Micro Finance Limited was transferred through a Business Transfer Agreement (BTA) as at the close of business hours on January 21, 2017, to " Utkarsh Small Finance Bank". The bank started operations with 5 new branches on January 23, 2017. and with effect from May 03, 2018, Reserve Bank of India issued a certificate for the conversion of the Utkarsh Micro Finance Limited company from NBFC - MFI - ND- SI to NBFC - CIC- ND- SI (Non - Deposit taking - Systemically Important Core Investment Company). The holding company has provided a strong base for starting the Bank with the capacity and capability to understand the needs of society at large in this geographical belt. The Bank had 5 Banking branches, 23 MSME Loan offices, 3 Housing Loan offices, and 350 Micro-Finance Branches as at the close of business on March 31, 2017. Now as of 31.03.2019, the Bank has operations in 139 Districts across 11 States of Bihar, Chhattisgarh, Delhi-NCR, Haryana, Himachal Pradesh, Jharkhand, Madhya Pradesh, Maharashtra, Uttar Pradesh, Uttarakhand and West Bengal with 61 General Banking (GB) Outlets and 375 Micro Banking (MB) Outlets, served by over 6,300 dedicated employee Now Utkarsh Micro Finance Limited is only a (Holding company) of Utkarsh Small Finance Bank and holds 99.99% of shares of Utkarsh Small Finance Bank as on 31.03.2019.

Services: Utkarsh Small Finance Bank offers a gamut of Banking products & services which also includes Micro, Small and Medium Enterprise (MSME) Loans, Housing Loans (HL), Wholesale Lending, Deposit Accounts (CASA, FD & RD), Insurance, Mutual Funds, Remittances, Institutional, Government and TASC services. Utkarsh also offers a wide range of payment services which include Debit Cards, ATMs, POS Payments, Digital offerings like Internet Banking, Mobile Banking, and payments through NEFT, RTGS, and IMPS.

Headquarter: Varanasi, Uttar Pradesh Utkarsh Small Finance Bank has operations in Bihar, Chhattisgarh, Delhi-NCR, Haryana, and Himachal Pradesh Jharkhand, Madhya Pradesh, Maharashtra, Uttar Pradesh, Uttarakhand, and West Bengal.

FY18-19 Factsheet:

a) The bank is operating out of 139 Districts of 11 States across India with 61 General Banking (GB) and 375 Micro Banking (MB) Outlets.

b) The Bank has crossed a dual milestone of two lakh saving account customers and 20 lakh active loan clients.

c) The Bank closed the year with total Gross Advances of 4,740 crores and total Deposits Base of 3,791 crores.

d) CASA ratio has improved and now stands higher than 10% of total deposits.

e) The year witnessed a Net Interest Income (NII) of 497.4 crores and an Operating Profit of 219 crores.

f) The Bank has achieved 93.9 crores of PAT.

g) The Net NPA ratio of 0.12% is a true reflection of the robust portfolio that the Bank possesses.

FY19-20 Factsheet

a) The year Utkarsh has completed 10 years of its exciting journey. To mark the occasion, Utkarsh Small Finance Bank Limited (USFBL) i.e. the Banking subsidiary inaugurated 21 Banking Outlets pan India on September 21, 2019.

b)This year the Bank expanded its operations by entering Odisha with the launch of 19 Branches, out of which 18 were Micro Banking Outlets, reiterating its focus on financial inclusion.

c) As of 31.03.2020, Utkasrh SFB has Rs. 6600 Crores of AUM and Rs. 5235 Crores of Deposit.

d) As of 31.03.2020, Utkarsh SFB has 507 Banking Outlets and 177 ATMs pan India, spread over 173 Districts of 17 States and Union Territories, having over 8,800 employee base.

Utkarsh Core-invest Financial Performance FY19-20

1. Loan Book Growth: The loan book has increased from 4668 Cr to 6281 Cr in FY19-20. The bank has shown a staggering growth of 35% loan book growth.

2. Deposits Growth: It has increased from 3791 Cr to 5235 Cr in FY19-20.

3. NIM - Net Interest Margin (Interest Earned - Interest Expended/ Loan outstanding): The NIM of Utkarsh Small Finance bank stands at 11.59% in FY19-20. Last year it was 10.68%. An increase in NIM is always positive for the bank and shows banks' margins are increasing on loan given.

4. Gross NPA: The Gross NPA has increased from 0.71% to 1.39%. However, the figure is quite manageable.

5. CRAR - Credit to Risk-Weighted Assets: CRAR is an important regulatory measure from RBI which banks need to maintain all the time. The minimum CRAR requirement as per RBI is 15% for Small Finance Bank. Utkarsh Small Finance Bank has 24.14% of CRAR in FY19-20 which is well above the regulatory requirement.

6. Revenue: It has gone up to 1406 Cr in FY19-20 as compared to 929 Cr last year. Excellent growth of 51% in topline.

7. PAT: It has gone up to 186 Cr in FY19-20 as compared to 93 Cr last year. Excellent growth of 100% in the bottom-line. So, we at UnlistedZone in the view that the bank has performed outstandingly well in FY19-20.

Analysis of FY20-21 Financial Results

a) Utkarsh Small Finance Bank has clocked revenue of 1,725 Crore in FY 2020-21, compared to 1,406 Crore in FY 2019-20, clocking a year-on-year growth of 22.68%. The growth is mainly attributed to increase of gross loan portfolio and increase in deposits.

b) The operating profit of the Bank stood at 438 Crore in FY 2020-21 compared to 350 Crore in FY 2019-20, clocking a year-on year growth of 25.13%.

c) Utkarsh Small Finance bank in order to counter the impact of Pandemic has made provisions of 286 Crore in FY 2020-21 compared to 100 Crore in FY 2019-20, registering a year-on-year increase of 187.25%.(This is the main problem which is happening with Small Finance banks).

d) Due to higher provisions, PAT stood at 111 Crore in FY 2020-21 compared to 186.74 Crore in FY 2019-20.

e) The Return on Assets (RoA) stood at 1.04% and Return on Net Worth (RoNW) at 9.99% for the year ended March 31, 2021.

f) The Loan Book during this period was at 8,416 Crore across various business units namely Micro-banking, Wholesale Banking, Retail Assets (MSME and personal Loans), Housing Loans, Business Correspondents, Commercial Equipment and Construction Vehicles and others. The Micro-finance portfolio contributed to around 82% while other businesses contributed around 18% towards the Loan Book.

g) During FY 2020-21, the Bank successfully opened 16 new micro banking branches. Bank’s micro-finance loan portfolio has grown by 17.82% during FY 2020-21 to reach 6,899 Crore as on March 31, 2021.

Micro-finance Loan is the Core business- Most affected by Covid-19

a) Utkarsh Small Finance being an NBFC-MFI, micro-finance remains a focused business segment for the Bank.

b) Micro-finance lending comprised 81.98% of the gross loan portfolio of the Bank as on March 31, 2021. Under micro-finance lending, the Bank focuses on financial inclusion of the underprivileged and economically weaker sections of the society, who get very limited or no access to financial services. The Bank provides JLG loans, individual loans, swacchata loan and two-wheeler loans under micro Loan Composition mix as on March 31, 2021

c) Bihar and Uttar Pradesh has been core geography for the Bank’s micro-finance portfolio. Micro-finance loans continues to be substantially diversified with an average ticket size of 27K (based on outstanding loan portfolio), with tenors ranging between 12 to 24 months.

d) As on March 31, 2021, the Bank had more than 25 lakh active loan accounts under micro-finance lending spread across 141 districts and 11 states, serving through 420 micro banking outlets.

Financial Performance of Utkarsh Coreinvest in Fy 21-22

1. The revenue has increased from Rs.1780 Crores in Fy21 to Rs.2094 Crores in Fy22.

2. EBITDA has increased from 857 Crores in Fy21 to 962 Crores in Fy22.

3. Provisioning for NPAs have increased from 326 Crores in Fy21 to 438 Crores in Fy22. Due to this the profitability has gone down.

4. PAT has decreased from 111 Crores in Fy21 to 42 Crores in Fy22.

5. Net-worth as on 31.03.2022 = 841 Crores and no. of shares outstanding are 9.833 Crores.

6. Currently, in the unlisted space, it is available at Rs. 170 per share. So, on that basis, M.cap is 1600 Crores.

NPA Situation of Utkarsh Small Finance Bank

a) As on 31.03.2022, GNPAs stood at 6.10% and NNPAs was at 2.31%

b) As on 31.03.2021, GNPAs stood at 3.75% and NNPAs was at 1.33% So, massive jump has seen in the NPA levels due to Covid-19. And, due to high provisioning of NPA, the PAT has suffered for the bank.

Valuation and Expected price band of Utkarsh Small Finance Bank

Book Value as on 31.03.2022 = 17.65 So, if we give the P/B of 2x to Utkarsh Small Finance Bank, then Expected Price of Utkarsh Small Finance Bank would be 35 per share.Valuation = ~3100 Crores.