|
- Strong Parentage and synergies
The Reserve Bank of India (RBI) had issued a Small Finance Bank licence on October 12,2021 to the consortium of the Centrum Financial Services Ltd. (CFSL), lending arm of Centrum Group and Bharat Pe. Centrum Group offers comprehensive services across Investment Banking (Equity & Debt), Stock Broking (Institutional & Retail), Wealth Management to HNIs and Family Offices and Affordable Housing finance in tier 2 & 3 cities. Its Asset Management business offers funds across Private Debt and Venture Capital.
The new SFB was incorporated as ‘UNITY SFB’ on August 25,2021 and has a networth of Rs.1796.92 Cr. as on September 30, 2022 as against regulatory requirement of minimum initial networth of Rs.200 Cr. for SFBs. As a part of arrangement to operationalize this license, all the assets and liabilities of CFSL and CML has been transferred to UNITY SFB for 51% stake with effect from November 1, 2021 while Bharat Pe has infused capital for its 49% stake.
Centrum group experience in MSME & MFI segment has helped the bank to grow its overall AUM. The AUM grew from Rs 2419.12 Cr. as on March 31, 2022 to Rs. 3148 Cr. as on September 30, 2022. The portfolio of the bank consists of loans towards Microfinance, SME, supply chain, MSME and PMC legacy book. USFB plans to focus on Microfinance, SME, SCF & MSME and would run down the portfolio of the PMC bank. USFB has maintained an overall PCR of 95.02 percent on the advances as on September 30, 2022.The net of the collections, the overall book of USFB is growing at ~Rs. 120 Cr. per month.
- Experienced Management & Board
The bank has put in place an experienced board & management team comprising professionals having significant expertise in their relevant domains. At the helm of affairs is Mr. Inderjit Camotra CEO and MD of UNITY SFB and has vast experience having worked at reputed banks.
Mr Ranjan Ghosh, Ex-Global Head of Commercial Banks & Asset Financing, Standard Chartered Bank and having close to 3 decade of rich experience in the Banking & Financial Service Industry is the President of the SFB. Mr. Saurabh Srivastava around 2 decades of experience in Corporate Finance across various Indian and Foreign Financial Institutions is the Chief Risk Officer (CRO). Mr. Abhishek Baxi with around 2 decades of extensive experience in Accounts & Finance, Budgeting & Costing, Investor Relations, Financial & Regulatory Reporting, Internal Controls and Compliance is the Chief Financial Officer (CFO). Mr. Sanjay Rele (Head Financial Markets & Treasury), a seasoned Treasury professional with career spanning over 2 decades across various banks and has carried out key functions across different Treasury functions in India and Overseas markets.
UNITY SFB’s board is further supported by seasoned bankers comprising Mr. Vinod Rai (Independent Chairman), He is a former Comptroller and Audit general of India. Mr Rai has wide experience working in various capacities at both the central and state government. Mr. Subhash Kutte(Independent Director), who is currently associated with RBL as Senior Advisor having experience of over four decades and has worked in various capacities with RBL Bank, Mr. Basant Seth (Independent Director) with experience of nearly two decades who was earlier associated with SBI as Independent Director, Syndicate Bank as Chairman and Managing Director (CMD) and SIDBI as Deputy Managing Director and Mr. Sandip Ghose (Independent Director)carrying experience of nearly twenty five years across various functions in financial services industry. Ms. Renu Basu(Independent Director), a Sales and Marketing professional with over 3 decades of work experience in Customer Management, Revenue Management, Brand Building and Digital Marketing
- Adequate Capitalization Levels:
Unity Small Finance Bank reported healthy capitalization levels marked by a networth of Rs. 1796.92 Cr. and an outstanding debt of ~ Rs.272.36 Cr which resulted in gearing of 0.15 times as on September 30, 2022. The bank has repaid the grandfather borrowing of Centrum group of ~Rs. 1200 Cr. The bank also reported adequate CAR levels of 62.75 percent as on September 30, 2022.The bank is doing net additions to deposits to the tune of ~ Rs. 80 Cr. every month. Going forward financial losses might impact the capitalization levels of the SFB.
- Staggered payment mechanism and comfortable liquidity profile:
The depositor’s settlement will happen over a period of 10 years, which supports the bank’s ALM. As per the scheme of amalgamation the depositors upto 5 lacs would be paid upfront from the funds received via DICGC. The bank has paid 97 percent of the retail depositors (Depositors under 5 lacs). The pay back to DICGC has to be done at the end of 20 years.
As on September 30, 2022, the bank has a cash and cash equivalent of Rs. 523.24 Cr. The bank has investments of Rs. 2704 Cr. as on September 30, 2022 which consist of investments in Government securities, Shares, Debentures And bonds. The bank had an LCR of 677.90 percent and 977.27 percent as on September 30, 2022 and March 31, 2022 respectively indicating comfortable liquidity position.
|
|
- Small Scale of operation and limited track record of working as an SFB
Unity Small Finance Bank Limited (UNITY SFB), incorporated on Aug 25, 2021 was granted a Small Finance Bank licence on October 12, 2021 by Reserve Bank of India (RBI). The bank operates from a branch network of 111 branches as on September 30, 2022. The bank advances grew from Rs. 2419.18 Cr. as on March 31, 2022 to Rs. 3148 Cr. as on September 30, 2022. For increasing the depositor base the bank has launched various schemes, however the SFB is in initial stage of building the deposit franchise. The bank has deposits of Rs. 1586 Cr. as on September 30, 2022. Post the amalgamation of PMC with unity SFB, the bank had reported a weak asset quality. The bank reported a GNPA of 56.29 percent and an NNPA of 6.02 percent as on September 30, 2022(GNPA with PMC book: 56.29 percent and without PMC book: 4.62 percent). However, the bank has made adequate provisions for the same, the bank’s PCR stood at 95.02 percent as on September 30, 2022.
The bank has a subdued earning profile as reflected by the losses reported by the bank. The bank reported losses of Rs. 99 Cr. for H1FY2023 and Rs. 149.61 Cr. for FY2022. These losses are expected to continue for a couple of years on account of fair value treatment provided for the restructuring done for the liabilities.
However, the bank reported an operating profit of Rs. 83 Cr. for H1FY2023 and Rs. 17 Cr. for FY2022 in spite of high opex which is expected to remain elevated in near to medium term. The bank also reported a Net Interest Income (NII) of Rs. 25.75 Cr. for Q2FY2023 and Rs. 9.06 Cr. for FY2022.
Acuite takes a note of improvement in profitability metrics on account of increased revenue, reduced borrowing and one time settlement of retail depositors.
Going forward, UNITY SFB’s ability to sustainably scale up its banking business will be key monitorable.
|
