BOB Capital Markets (BOBCAPS) has reiterated its BUY call on Ujjivan Small Finance Bank in a result review dated Oct. 18, 2026, raising its target price to Rs 78 from Rs 72. The brokerage now values the lender at 1.7 times estimated September 2028 adjusted book value, up from 1.6 times, citing a strong second quarter and a constructive outlook. At about Rs 12,240 crore in market value (TopNews calculation), the stock trades at 1.5 times fiscal 2027 estimated book and 9.9 times earnings.

The thesis is straightforward: microfinance stress has peaked, credit costs are settling, and a richer mix of housing, small-business and gold loans should make earnings both larger and less volatile.

The quarter in figures

Net profit climbed 15.3% sequentially and nearly 200% year on year to an all-time high of Rs 365 crore. Net interest income rose 35.4%, and pre-provision operating profit jumped 50.2%, while provisions more than halved. The cost-to-income ratio improved by about 490 basis points over the year to 61.5%.

Return ratios clear management's bar

Annualised return on assets improved to 2.4% from 2.2% in the first quarter, and return on equity to 19.7% from 18.2%. Management kept its RoA target at 1.8% to 2% but signalled it could exceed that range if performance holds, and trimmed its opex-to-average-assets goal to 6.2% from 6.4%. BOBCAPS models fiscal 2027 RoA of 2% and RoE of 16.8%.

The secured seesaw

The most consequential strategic shift is the rebalancing of the loan book. Secured loans made up about 52% of the portfolio, and management targets roughly 56% by the end of fiscal 2027, then about 5 percentage points more each year in line with its ambition to become a universal bank. The trade-off is yield: asset yields slipped about 10 basis points as the mix moved toward lower-risk, lower-return assets.

Counting growth on the abacus

Overall advances grew 32.4% to Rs 44,753 crore, and the bank held its fiscal 2027 loan growth guidance at 25%. Gold loans were the standout, tripling on favourable industry trends, while microfinance grew a modest 6% in the first half against full-year guidance of 12% to 14%. Collection efficiency stayed at 99.7%, and the bank added about 2 lakh microfinance customers in the quarter.

Deposits strong, CASA still lagging

Deposits crossed Rs 50,000 crore, up 29.2%, but the low-cost current and savings account share slid to 26% from 26.9% a quarter earlier. Management expects new-to-bank customer additions, up 34% year on year, to lift CASA to about 28% by March 2027. The credit-deposit ratio rose to 88.4%.

Funding costs are near an inflection. Deposit repricing kept the cost of funds at about 6.9%, but with most of that benefit already captured and policy-rate increases feeding through, management expects a rise of about 10 basis points in the third quarter. Net interest margin was put at 8.4%, down 10 basis points, and is guided to ease to about 8.3% in the second half. A Rs 500 crore increase in the securitisation pool is expected to support margins.

Asset quality and the drought question

Gross and net bad-loan ratios improved to 2.10% and 0.31%, with provision coverage near 85%. Slippages edged up to about Rs 180 crore from Rs 170 crore, keeping the slippage ratio near 1.6%, while write-offs fell to Rs 59 crore. Management retained credit-cost guidance at 0.9% to 1% of average assets. More than 60% of microfinance borrowers have at least two household income sources, reducing reliance on farming.

The watch item is drought relief. State-level bankers' committee notices in Karnataka and Maharashtra make some farm-linked loans eligible for relief, and BOBCAPS expects other states could announce similar measures. The bank's direct eligible exposure is small:

Gauge fill shows the farm-linked share of each state's microfinance book; the red line marks the portion eligible for relief.

Fees, capital and leadership

Estimates and the Rs 78 target

BOBCAPS projects net profit to rise 79% in fiscal 2027 to about Rs 1,241 crore, then compound at roughly 26% a year through fiscal 2029, as provisions normalise near 1% of assets and margins hold around 8.3% to 8.5%.