Ujjivan SFB share price slips for 8th day; buy or sell?

Shares of Ujjivan Small Finance (SFB) on Friday tumbled for the eighth straight session, as net profit for June quarter sank 66 per cent on elevated provisions and lower interest income. Margins were hit, partly offset by higher treasury gains. 

The SFB's management is confident that slippages  are peaking out in 9 out of 10 states in Q4FY25, while Karnataka slippages have peaked out in Q1. Slippages are expected to trend downwards as the SMA pool continues to decline, said analysts as they retained their buy call on the stock. Analysts are positive as they suggested targets of up to Rs 60 on the counter. 
On Friday, the stock fell 6 per cent to hit a low of Rs 42.93 on BSE. In the eight-day selloff, the scrip has lost a total 14 per cent.

In order to de-risk its balance sheet from cyclicality and lumpy credit cost during MFI asset quality cycle, Ujjivan strategically shifted its focus towards scaling secured retail assets since FY24. 

"As a result, its share increased to 46 per cent by Jun’25 against 30 per cent in Mar’24 and grew 61 per cent YoY during Q1FY26. While management is cognisant of the adverse impact on NIM (fell >150bps over the past four quarters) due to asset mix change, it believes increasing share of retail asset would help in smoothening credit cost going forward," said ICICI Securities. 

The brokerage cited a moderation in credit cost at 2.8 per cent in Q1 from 3.4 per cent in Q4FY25 despite seasonality and Karnataka issue while retaining 'Buy' on the stock with an unchanged target of Rs 55. 

Axis Securities said Ujjivan's loans (IL) portfolio asset  quality continued to fare better than group loans (GL), ex-Karnataka. However, in certain districts of Karnataka, the loan portfolio has been facing headwinds owing to the impact of the ordinance. On the other  hand, the loan portfolio in the key states such as Tami Nadu and Maharashtra continued to hold up well. 

"While in  the GL portfolio, the southern states continue to exhibit stress, the Eastern and Western  geographies continue to see stability, and the bank is comfortable in resuming growth in these  geographies. The bank intends to keep the MFI portfolio diversified with no geography contributing more than 15 per cent," it said.
This brokerage retained its 'Buy' on the stock with a fresh target of Rs 52 from Rs 49 earlier. 

Emkay Global believes Ujjivan SFB could be a strong beneficiary of MFI recovery, thereby improving its RoA trajectory from 1.4 per cent in FY26E to 2.2 per cent in FY28E. 

"Additionally, the bank is a potential candidate for the Universal Banking license, which should be both capital and RoA-positive. Thus, retain BUY with an unchanged TP of Rs60, rolling forward on 1.5x Jun-27EABV," Emkay Global said.