Ujjivan’s microfinance AUM continues to grow, there’s no slowdown in demand: Nitin Chugh

We are overwhelmed with the response that we have got for our issue from the institutional investors, the non-institutional HNI investors as well as the retail investors, says Nitin Chugh, MD & CEO, Ujjivan SFB. Excerpts from an interview with ETNOW.

Are you surprised by the sort of response that you have got? The issue got subscribed 167 times. There is a lot of interest in this IPO?
Yes, we are truly overwhelmed. I would not say we are surprised. We are completely overwhelmed and pretty happy with the response.

What do you think will differentiate Ujjivan Small Finance Bank (SFB) from others? Is it the digital strategy? The way banking business was done earlier versus now?
All the SFBs have their own place in the market. We have created an identity for ourselves by staying focussed on the mass market and trying to use technology as much as we can. Obviously, there is a clear plan on the digital side as well. We are in for some very good times in terms of use of technology as well as what we want to do for our customers.

In terms of investor response, what do you think made this IPO so special? Is it valuations, is it size of opportunity?
I would like to believe it could be a combination because if you go by the brokerage reports, there is a mention of the valuation also but we believe we have a good story and there is confidence that the investors have shown and that is extremely heartening for us. We are overwhelmed with the response that we have got and it is across the institutional investors, the non-institutional HNI investors as well as the retail investors. All categories of investors have really placed confidence in us, which is truly gratifying.

The market is keen to understand how you would navigate the competitive landscape. Can you talk to us about how big a brand or the microfinance business of Ujjivan will help the small finance bank as well?
Yes, microfinance business is obviously the oldest and the most evolved one. When we started the bank in 2017, 98% of our book was microfinance. As of September, 2019, we are 79%. We are also obviously diversifying into other business lines and we have been able to grow our affordable housing and our MSE business as well.


We believe there is a chance to just stay focussed on the mass market. There is room to expand all kinds of business lines and microfinance obviously will continue to be a strength for us. We are equally focussed on the other lines of businesses.

When we talk about businesses in terms of microfinance, we have had the big merger of Bharat Finance with IndusInd. They are saying that microfinance provides them a very high customer base. Ujjivan already has that built in and now it has converted into a small finance bank as well. How does a high number of customers with low ticket size help a small finance bank?
We have transformed our microfinance business to micro banking. We want to take all the banking services and products to the microfinance customers because we owe it to them. We cannot be dealing with them with just a loan product, which is what we have done so far.

We are making a logical progression towards making them more included with the other financial services and products as well. Now when that happens, the base is large enough but as you can imagine, the transaction and ticket sizes would be smaller. That does require a differentiated approach towards those customers. At the same time, the commitment to make sure that they are included in all kinds of financial services is equally strong on our side.

Are you seeing any pickup in rural demand?
The core business of microfinance is reasonably insular to all kinds of cycles and the demand for microfinance has not quite slowed down. It is, in fact, growing and if you looked at the recent reports on the industry, microfinance AUM has continued to grow. We have not seen any slowdown on demand and in fact, we are seeing the demand staying very much consistent and if at all, in pockets where the penetration levels are not very high, the demand is probably going up.