The microfinance sector has expanded rapidly over the years, narrowing the gap between financial inclusion and formal banking. Nevertheless, the industry had recently faced challenges too. The increase in bad loans, over-leveraging, and economic shocks placed lenders under pressure.
Most microfinance institutions witnessed high delinquencies in the year gone by. The same resulted in steep valuation decline, with several banks focused on microfinance selling at record lows.
Now, the industry appears to be getting back on track. Asset quality is strengthening, lending is gaining traction, and there are early signs that profitability may be beginning to recover. This reversal makes it a good time to consider the lowest-priced microfinance banks, especially those with low price-to-book value (P/BV) ratios.
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Here in this article, we will examine five of the lowest-valued microfinance banks. Let us look at them in detail.
#1 Suryoday Small Finance Bank
Formed in 2008, Suryoday Small Finance Bank is a prominent small finance bank operating in India. The organization initiated SFB service in 2017. It caters to customers of unbanked as well as underbanked classes. Prior to small finance bank, the firm was engaged as a non-banking finance industry (NBFC).
The company is at a P/BV multiple of 0.5 time now. It is well below its 1-year median PE of 1 time.
1-Year P/BV Chart of Suryoday Small Finance Bank
Source: Screener.in
Suryoday Small Finance Bank’s quarter and nine months ended 31 December 2024 financial performance, shows resilience as well as continued challenges.
As of Q3 FY25, the gross NPA (GNPA) was 5.5%, up from 3.1% reported in the same quarter last year. But on adjusting for anticipated Credit Guarantee Fund for Micro Units (CGFMU) claims, the GNPA falls to 2.6%.
Likewise, net NPA (NNPA) stood at 3.1%, versus 1.4% year ago, but on adjusting for CGFMU claims, NNPA comes down to less than 0.1%.
Net interest income (NII) increased 24.6% YoY at Rs 861.5 crore, while pre-provision operating profit (PPOP) went up by 5.2% at Rs 342.6 crore. PAT, however, fell 4.1% YoY at Rs 148.7 crore.
The bank had a capital adequacy ratio (CRAR) of 26.9%, Tier I capital of 25.3%, and Tier II capital of 1.6%. This reflects robust capital buffers in the face of asset quality stress.
#2 Utkarsh Small Finance Bank
Utkarsh Small Finance Bank was incorporated in 2016 and is involved in offering banking and financial services.
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