Ujjivan – Growth Unleashed
This Report on Ujjivan Finance was sent to our premium clients about 50 Days back on the 16/5/2016 at CMP 258.
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THESIS
At Stallion Asset we normally look for companies that can
1)Grow at 25% plus for long periods of time (opportunity size)
2)Generate High ROCE
3)Smart and Ethical Management
4)Reasonable valuations
We believe Ujjivan financial services has the above traits. Ujjivan is one of the leading MFIs in the country with a pan-India presence serving the under-privileged. The Microfinance Industry is expected to grow at 30%+ rates for next 5 years. We strongly believe that growth is sustainable in this sector for long periods of time.
History – Microfinance Industry can be divided in 3 phases after RBI gave permission for setting up microfinance companies in 2000
1) Phase 1 – (2000-2010)-Initial Growth phase where MFI AUM grew at 100% CAGR to INR 163 Billion.
2) Phase 2 – (2010-2012) – Following reports of suicides by some women borrowers; the Andhra Pradesh government passed an ordinance in Oct’10 restricting the activities of MFIs in terms of new disbursements and collections. The cause of the borrowers was supported by some political parties, which led to a mass default in AP. Micro-finance companies lost 30-40% of their outstanding portfolio in the sector due to this mass default. Most microfinance companies which had significant exposure to AP went bankrupt after the mass default.
3) Phase 3 – (2012-Present) – Revival after Regulation – The microfinance industry stood back on its feet with loan growth of more than 50% CAGR. The RBI announced setting up of small finance banks last year. MFIs were the favourites with the RBI, grabbing 8 of 10 small finance bank licenses.
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Disclosure – Stallion Asset has Vested Interest. This is not a recommendation but for education Purpose only.
