Ujjivan SFB likely to elevate Carol Furtado as interim MD, CEO next week

Troubled with huge NPAs and top-level exits, Ujjivan Small Finance Bank is expected to elevate its head of operations Carol Furtado as an interim chief early next week.

The bank's managing director and chief executive Nithin Chugh has resigned on Thursday (August 19, 2021), citing personal reasons.

The bank in a concall with analysts, presided by founder Samit Ghosh, hinted about the appointment of Furtado as the interim MD and CEO on August 25.

Even as Chugh cited personal reasons for his resignation, the impression from the concall indicated otherwise, Emkay Global Financial Services said in a note.

The impression was that it was due to the bank's persistent underperformance on asset quality front, delayed recognition/correction of NPAs as well as large scale attrition at the lower-middle level, it added.

Some niggling issues with the old management and non-compatibility with new-age management could have also contributed to the resignation, according to Emkay in its key takeaways from the concall.

"Bank's board is expected to appoint an interim CEO in its board meeting on August 25. The top contender for the interim CEO post seems to be old hand Carol Furtado, the Head of Operations at the bank," it added.

According to Ghosh, the new permanent MD and CEO could be an internal or external candidate, and the appointment can take at least three to six months.

"The impression from the call was that the bank could be more inclined toward an internal candidate, and possibly Furtado could be a preferred choice as permanent CEO," Emkay said.

She has worked with foreign banks before joining Ujjivan in 2005 and has good experience in the microfinance space.

With the resignation of Chugh, who will stay with the bank till September 30, Ujjivan SFB on Thursday appointed four directors, including Ghosh and erstwhile CEO and CFO Sudha Suresh to strengthen the board, oversee the management and resurrect the bank.

Earlier this month, directors Harish Devarajan and Mona Kachhwaha had resigned from the bank, while Chief Financial Officer Upma Goel had tendered her resignation on July 7.

Besides the top-level exits, Ujjivan SFB is facing a massive exodus of lower-middle level employees, which has more to do with the work environment than remuneration, according to Emkay.

In the concall, Ghosh indicated that the bank would be keen to re-onboard the employees if they have not joined elsewhere.

The bank's overall recognised stress pool stands at 15.6 per cent of the loan book. This includes gross non-performing assets of 9.8 per cent and restructured loans of 5.8 per cent.

The portfolio-at-risk has swelled to 30 per cent as of June 2021.

"Under the new management, the bank would look toward upfront stress recognition and accelerated provisioning, which means that it would reel under losses for some more time," said the research note.

Emkay has trimmed its estimates for FY22-24 due to high NPA levels. Retaining sell rating, it expects the share price to drop to Rs 17 from Rs 23.

Shares of Ujjivan on Friday tumbled over 18 per cent to close at Rs 19.70 apiece on BSE.