Utkarsh Micro Finance Ltd

Utkarsh Coreinvest Ltd.(erstwhile Utkarsh Micro Finance Ltd) is the promoting institution for ‘Utkarsh Small Finance Bank’. Utkarsh Micro Finance 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.

Utkarsh Small Finance Bank offers 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 wide range of payment services which includes Debit Cards, ATMs, POS Payments, Digital offerings like Internet Banking, Mobile Banking and payments through NEFT, RTGS and IMPS.

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

The CSR initiatives with ‘Utkarsh Welfare Foundation’ focus on Education (Financial Awareness) and Health (Polyclinics with Mobile Van) activities. It also organizes Blood Donation Camps, support orphanages and elderly homes as goodwill gesture



Industry Outlook

UMFL earning profile is good, (ROE of 15.8% in 2015-16 on a higher capital base post infusion) and is supported by moderate operating expenses (6.67% as a percentage of average managed advances) despite the relatively higher pace of growth. However, diversity of earnings continues to be low, as the company is almost entirely dependent on JLG segment (94% of the total portfolio) for income. As for incremental profitability, operating expenses are expected to increase owing to the conversion to a SFB which would affect profitability in near term. Going forward, there could be some decline in profitability indicators owing to expenses related to broad basing the management team, IT related expenses and one time infrastructure costs. Over the long term, ability of the company to raise a stable low cost liability franchise and maintain good asset quality indicators will be important for maintaining good profitability indicators.

The highest MFI grading for UMFL is supported by its good loan origination, internal audit, MIS, risk management and collection mechanisms, its experienced board, management team and strong investor profile which have been strengthened further over the last one year. These positives, coupled with UMFL’s good financial flexibility arising out of relationships with a large number of lenders as well as its ability to raise equity in a timely manner have helped the company to scale up operations (portfolio of Rs 1809 crore with 66% growth in client base) while expanding and diversifying across 10 states.UMFL’s high pace of growth, and relatively high attrition rates for the industry and ability of the company to diversifying into newer geographies as well as newer products (housing loans and microenterprise loans) while maintaining the asset quality indicators would be important from a grading perspective Despite the high pace of growth, the company has been able to maintain good capitalisation indicators supported by frequent capital infusions as well as improving internal capital generation. However, the company would need additional capital to maintain the pace of growth, as well as reduce foreign shareholding below 50% to meet the SFB guidelines. The company has tied up Rs. 395 crore of domestic equity to bring down the foreign shareholding in order to meet SFB requirements and is awaiting RBI approval for infusion of capital. Based on the track record of UMFL’s equity raising in the past and its strong investor profile, ICRA expects the company to be able to raise equity in a timely manner going forward as well. UMFL had a diversified funding profile, with 44 direct lenders and increasing share of debt market instruments in the overall resource mix. As for UMFL’s liquidity profile, it is comfortable supported by the well relatively shorter tenor assets vis-a-vis liabilities. However the company would require regular flow of funds for meeting its growth plans. As the company converts to a Small Finance Bank, its funding requirements would increase by 20-25%, and the company would need to develop a deposit franchise over the medium term to replace the maturing liabilities, maintaining regulatory reserve requirements (cash reserve ratio and statutory liquidity ratio), as well as for growth. In the short term, the company would be dependent on refinance from SIDBI, NABARD, MUDRA, funding through NCDs, CDs, securitisation and Inter Bank Participation Certificate (IBPC), borrowings from NBFC, Bulk deposits.


Financial Highlights:

  • Capital Adequacy Ratio is 24.14%
  • Return on Assets (Working funds ) is 1.86%
  • Net profit Margin is 3.67%
  • Average net profit before tax of the Bank for last three financial years is ₹ 20.16 crore.
  • The Current Account-Savings Account (CASA) Ratio increased from 3.9% (March 2018) to 10% (March 2019)
  • The gross advances grew by 48% from 􀀀I3,208 crore (March 2018) to 􀀀I4,740 crore (March 2019).
  • The Gross NPA and Net NPA were 1.39% and 0.12% respectively as on March 31, 2019
  • The Bank’s net worth, as on March 31, 2019 stood at ₹ 772.8 crore

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Ratio Analysis:

Debt to Equity Ratio

Year 2018 2017
Total Liabilities 3,378.49 3,214.09
Shareholders’ Equity 874.00 309.00
Debt to Equity Ratio 3.87 10.40

The Debt Equity ratio has lowered as compared to last year indicating better long term financial stability.


Year 2018 2017
EPS 20.97 9.82

The EPS has doubled in the year 2018 as compared to 2017 indicating improvement in profitability.

Current Ratio

Year 2018 2017
Current Assets 3,027 2,312
Current Liabilities 3,140 2,973
Current Ratio 1.04 1.29

The current ratio above 1 suggests a good short term solvency position of the company.

Return on Equity

Year 2018 2017
PAT 578 271
Equity 874 309
ROE 66% 88%

A high ROE of over 60% for the last two years indicates good profitability of the company. It also assures that the company has the ability to generate profits on the investors’ funds.

FA Turnover

Year 2018 2017
Turnover 4,592 3,927
Fixed Asset 1,159 1,140
FA Turnover 3.96 3.44

The Fixed Asset Turnover ratio suggests that the company is well able to generate revenue from its fixed assets employed.

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