Stock to buy: Lost 50% value, this small finance bank gets 64% upside target
Utkarsh SFB is aiming for nearly 25 per cent credit growth over the next two to three years, with secured products forming half of the book and return on equity approaching 15 per cent.
- Nov 25, 2025,
- Updated Nov 25, 2025 11:10 AM IST
ICICI Securities on Tuesday resumed coverage on Utkarsh Small Finance Bank (Utkarsh SFB) with a 'Buy' rating and a target price of Rs 26, valuing the lender at 1.25 times its estimated September 2027 book value per share. The brokerage said improving return ratios from Q4FY26 are likely to support a rerating. On Tuesday, the stock quoted flat at Rs 15.90 apiece, down 52.43 per cent over its 52-week high of Rs 33.43 per share hit in December 2024. The ICICI's target suggested a 63.52 per cent upside over the prevailing price.
It said Utkarsh SFB is aiming for nearly 25 per cent credit growth over the next two to three years, with secured products forming half of the book and return on equity approaching 15 per cent. The trajectory, it added, is expected to be driven by NIM expansion towards 8.5 per cent and a moderation in credit cost to nearly 2 per cent.
While a structural shift towards secured loans could compress NIMs, the brokerage viewed a higher share of secured assets as strengthening the bank’s long-term stability and profit sustainability. Elevated stress in the MFI book — with MFI GNPL at 23 per cent — would, however, keep credit cost higher in the near term.
ICICI Securities said Utkarsh’s subdued earnings were largely attributable to stress in the MFI portfolio, reflected in the 23 per cent MFI GNPL ratio as of September 2025 and a slippage ratio of more than 15 per cent (annualised) in Q2FY26. That said, X-bucket collection efficiency improved sharply to above 99 per cent in November 2025 versus 98.7 per cent in October, while the SMA pool declined to 4.8 per cent from 5.1 per cent sequentially and 9.3 per cent a year earlier.
These trends, it noted, indicated easing stress in the MFI segment and should help credit costs moderate from current levels of nearly 10 per cent. The non-MFI portfolio continued to perform well, with credit cost steady at around 2 per cent in Q2FY26.
Since converting to a small finance bank in FY17, Utkarsh had accelerated efforts to diversify its loan book. In the wake of the current MFI cycle, it increased the pace of scaling its non-JLG portfolio. MSME loans, housing, micro-LAP and vehicle finance emerged as key growth engines, lifting their combined share to 34 per cent in September 2025 from 32 per cent in the previous quarter and 26 per cent a year earlier.
ICICI Securities said this execution strength was reflected not just in stable credit costs of nearly 2 per cent but also in better profitability. Yields on CV/CE disbursements rose 80 basis points year-on-year, home-loan yields gained 40 basis points and MSME yields expanded 100 basis points.
ICICI Securities on Tuesday resumed coverage on Utkarsh Small Finance Bank (Utkarsh SFB) with a 'Buy' rating and a target price of Rs 26, valuing the lender at 1.25 times its estimated September 2027 book value per share. The brokerage said improving return ratios from Q4FY26 are likely to support a rerating. On Tuesday, the stock quoted flat at Rs 15.90 apiece, down 52.43 per cent over its 52-week high of Rs 33.43 per share hit in December 2024. The ICICI's target suggested a 63.52 per cent upside over the prevailing price.
It said Utkarsh SFB is aiming for nearly 25 per cent credit growth over the next two to three years, with secured products forming half of the book and return on equity approaching 15 per cent. The trajectory, it added, is expected to be driven by NIM expansion towards 8.5 per cent and a moderation in credit cost to nearly 2 per cent.
While a structural shift towards secured loans could compress NIMs, the brokerage viewed a higher share of secured assets as strengthening the bank’s long-term stability and profit sustainability. Elevated stress in the MFI book — with MFI GNPL at 23 per cent — would, however, keep credit cost higher in the near term.
ICICI Securities said Utkarsh’s subdued earnings were largely attributable to stress in the MFI portfolio, reflected in the 23 per cent MFI GNPL ratio as of September 2025 and a slippage ratio of more than 15 per cent (annualised) in Q2FY26. That said, X-bucket collection efficiency improved sharply to above 99 per cent in November 2025 versus 98.7 per cent in October, while the SMA pool declined to 4.8 per cent from 5.1 per cent sequentially and 9.3 per cent a year earlier.
These trends, it noted, indicated easing stress in the MFI segment and should help credit costs moderate from current levels of nearly 10 per cent. The non-MFI portfolio continued to perform well, with credit cost steady at around 2 per cent in Q2FY26.
Since converting to a small finance bank in FY17, Utkarsh had accelerated efforts to diversify its loan book. In the wake of the current MFI cycle, it increased the pace of scaling its non-JLG portfolio. MSME loans, housing, micro-LAP and vehicle finance emerged as key growth engines, lifting their combined share to 34 per cent in September 2025 from 32 per cent in the previous quarter and 26 per cent a year earlier.
ICICI Securities said this execution strength was reflected not just in stable credit costs of nearly 2 per cent but also in better profitability. Yields on CV/CE disbursements rose 80 basis points year-on-year, home-loan yields gained 40 basis points and MSME yields expanded 100 basis points.