A commitment to deliver and grow
With great pleasure I welcome you all to our virtual Annual General Meeting. I hopeyou are taking good care of your health and that of your family and adhering to thehealthcare advisories and social distancing norms to stay safe during the pandemic. Theseare unprecedented times - not witnessed or experienced in our lifetime and restraining ourmobility. This has constrained us from meeting and greeting you in person as is the normat the Company's Annual General Meeting. My sincere apologies - we hope to be able to holdour next AGM in the traditional way.
We closed the financial year 2019-20 with robust business performance and results. Ourconsolidated net profit jumped nearly 100% from '150.44 Crores to '298.65 Croresreflecting an extremely solid
performance of our subsidiary Ujjivan Small Finance Bank.
The Bank's operating profit in I-GAAP prior to provisioning rose from '309 Crores to'637 Crores and net profit rose from '199 Crores to '350 Crores up 76%. Gross Loan Bookgrew by 28% from '11049 Crores to '14153 Crores and deposits increased by 46% from'7379 Crores to '10780 Crores. Retail deposits grew from 37% to 44% in total depositsCASA increased by 86% funding cost declined by 30bps to 8.2% and NIM stood at acomfortable level of 10.8%. The cost to income ratio improved to 67% from 77% and net NPAfrom 0.3% to 0.2%. Loan loss provision coverage stood at an all-time high of 80%.
COVID-19 AND ITS IMPACT
As you all know on March 24
2020 the Government of India announced 21 days of nationwide lockdown initially whichwas extended from time to time with conditional easing in geographies where the spreadhas been minimal or contained. Based on the state governments' assessment of the groundlevel situation business establishments are being gradually reopened subject tocompliance of certain stipulations.
The lockdown had an unfathomable adverse impact across all segments of business andsociety. Health and livelihood of millions particularly of the poor have been affected.Some of the business sectors like airport auto hospitality travel and tourism realityand construction durable goods oil and energy financial services and entertainment werethe worst hit. The Monetary Policy Committee of the RBI in its recently held meeting inMay 2020 opined that
"the macroeconomic impact of the pandemic is turning out to be more severe thaninitially anticipated and various sectors of the economy are experiencing acutestress."
The Government of India has announced a slew of measures to cushion the COVID-19impact lift the economy from the downward spiral and propel economic activity.Concurrently the RBI has been announcing various measures at steady intervals to ensureadequate liquidity in the financial system and provide timely access to credit. Interestrates have been slashed and moratoriums on loan repayments have been announced.
It is premature to figure out how soon businesses will revive. Global and domesticimpact of lockdown social distancing supply chain disruptions reverse migration ofurban industrial workers to rural hometowns and change in consumer behaviour may continueto weigh heavily on the economy for some time. Auto real estate energy hospitalitydurable goods financial services are some of the sectors that may remain vulnerable.Credit risk will be the dominant risk across sectors. Containing the virus spreadaccelerating testing with speed and accuracy and providing timely medical support to theaffected may continue to be the priority of the state governments.
Now turning to your Company while the impact of COVID-19 would be restricted to thevalue of our investment in the Bank it may be more pronounced in the Bank's financialsand operations going forward. We would be able to get some grip on the magnitude of theimpact possibly in the third quarter once the Bank resumes full business operationsthroughout its network.
The Bank took timely steps like invoking its Business Continuity Plan well before thenationwide lockdown began and formed focused Quick Response Teams (QRT) to take criticalactions in areas like human resources customer care operations IT and infrastructureliquidity and cost management. The Bank's priority was the health and safety of itsemployees and customers. During the lockdown period most of the Bank's branches were runwith a skeletal staff maintaining social distancing norms. The work from home (WFH)policy at the Corporate and Regional offices ensured the availability of all criticalinfrastructures. IT security controls were augmented to address any gaps and potentialthreats in WFH arrangements. The Bank ensured that the lockdown period was productivelyused to upskill employees through the digital learning platform. An innovative'Janta-Connect' programme was launched to reach out to customers over phone; during theconversation the Bank staff sensitised its customers about COVID-19 and the precautionsthey should take enquired about
the state of their enterprise and the difficulties they faced and also createdawareness on the moratorium announced by the RBI. The Bank was thus able to connect withover 5 Million customers that is nearly 98% of the customer base.
In accordance with the RBI guidelines relating to the 'COVID-19 Regulatory Package'dated March 27 2020 and April 17 2020 the Bank granted a moratorium of three months onthe payment of all instalments and/or interest as applicable to all eligible borrowers.This was further extended based on the RBI guidelines of May 22 2020. Against thisbackdrop the Bank's focus has been to remain liquid and maintain adequate buffer for anyunforeseen contingencies in the coming months. Retail liability is being shored up and allavailable refinance windows are being fully tapped.
The Bank also made a special COVID-19 related provision for the year ended March 312020.
In addition to dealing with the COVID-19 impact the Bank had to grapple with thefloods in Assam and cyclone Amphan in West Bengal
and Odisha. While the situation in Assam and Odisha have improved and the impact onthe Bank's loan portfolio may not be high the situation in West Bengal where we have alarger network of branches has yet to be ascertained as branches there have only recentlycommenced operations.
LISTING OF THE BANK'S SHARES
In compliance with the regulatory Licensing Condition we had to mandatorily list theBank on the bourses within the stipulated timeline. The Bank made an Initial PublicOffering (IPO) of 20270270 equity shares of face value of '10 each for cash at a premiumof '27 per share aggregating to '745.95 Crores.
The issue reserved 20270270 equity shares aggregating to '70.95 Crores forsubscription by eligible shareholders of the Holding Company (Holco) at a discount of '2per share. As you all know the public issue received overwhelming response from theretail segment. The Bank has over 1.5 Lakhs retail shareholders many of whom are fromamong you. The shares were listed on the National Stock Exchange and the Bombay Stock
Exchange on December 12 2019. With the infusion of fresh equity capital adequacy ofthe Bank rose to 28.8% at the end of the year.
Reverse merger: We are confident given our satisfactory financial strength and trackrecord as well as regulatory and supervisory compliance that the regulator couldconsider the reverse merger of the Holco with the Bank. We will at the appropriate timetake necessary steps in this regard and keep you apprised.
Board succession: Now turning to the Board succession your Board has always ensuredhigh standards of governance. We planned ahead for the smooth successions at the CEO andBoard levels.
As I had shared with you at our last AGM we appointed Mr. Nitin Chugh as CEO tosucceed Mr. Samit Ghosh. The Bank bid farewell to Mr. Samit Ghosh in December 2019. Theentire rank and file of the Bank and the Holco showered their gratitude to Mr. Ghosh inunique and memorable ways. Having been associated with Ujjivan right from itspre-incorporation days
I cannot resist the temptation of sharing with you a personal mail that Mr. Ghosh hadsent to me in July 2004 when he made up his mind to set up a microfinance entity.
"Dear Mr. Ramamoorthy
My motivation to set up this enterprise is that as a financial services professional Ifeel strongly that we must do something to provide financial services to the vast poorpopulation of our country. It pains me to see so many pathetic attempts being made bypeople who are not professionals in this area. It is also important to me to do this in aviable manner. This is because the poor are ready to pay for the services and do not haveto denigrate themselves to
depend on grants and donors. I am aware that the NBFCis not the ideal legal vehiclebut the current regulations leave us with little or no alternative."
Looking back Mr. Ghosh lived up to every word he said in that mail and built astrong financially sustainable professionally managed bank dedicated to the mission ofproviding livelihoods for millions of the underserved and unserved. You will be happy toknow that Ujjivan Small Finance Bank with an asset base of over '18000 Crores serves 52Lakhs customers through its 575 branches and about 18000 employees spread across 244districts and 24 states and union territories.
Mr. Nitin Chugh after assuming the role of MD and CEO of Ujjivan Small Finance Bankquickly came to terms with most of the daunting issues ever faced by the Bank withoutdiluting his business focus. The financial results of the Bank bear an eloquent testimony.
We also bid farewell to another veteran Mr. Sunil Patel who was the Chairman ofUjjivan Small Finance Bank. He was also a part
of Ujjivan's journey right from pre-incorporation. He played a stellar role in guidingUjjivan particularly at legal tax and governance issues. He minutely studied the host oflegal documents and covenants that preceded every equity investment in Ujjivan andensured that at no point of time any of Ujjivan's existing investors' interests wereadversely affected with the entry of a new investor; all the while protecting Ujjivan'slong-term interest by not tying down its hands on any investment.
Mr. Biswamohan Mahapatra
a career central banker of repute took over as the Non-executive Chairman of the Bank.Mr. Mahapatra retired as an Executive Director of the RBI in August 2014 with a richexperience in banking regulation policy and supervision. He represented the RBI atinternational forums like the Basel Committee on Banking Supervision Financial StabilityBoard and their Committees.
He is also the Non-executive Chairman of National Payments Corporation and anindependent director on the boards of other reputed corporates. I extend him a warmwelcome.
We also made a few changes to our Board. Ms. Vandana Viswanathan ceased to be on theBoard from September 22 2019.
A very competent professional in Human Resources Management she made highly valuablecontribution. We will miss her prudent counsel and wisdom; the silver lining however isthat she will continue to be an independent director on the board of the Bank. We arehappy to welcome back Ms. Mona Kachhwaha to the Board. She is a very competent retailbanking professional with a rich experience in the Microfinance sector.
Now turning to the Chair of the Board I thought time is opportune for me to step downas the Non-executive Chairman at the conclusion of this Annual General Meeting and handover the mantle to Mr. Samit Ghosh. A resolution proposing his appointment as aNon-executive Director on the Board of the Company is being placed before you at this AGMfor approval. I commend the same.
I profusely thank you dear shareholders for the trust confidence and regard you havealways shown me. I cherish my fond association with you all. Given the challenging yearahead I will continue to be on the Board as an Independent Director until the completionof my tenure.
|Thank you again. |
|K.R. Ramamoorthy |