Ujjivan SFB profit rises as Elara keeps Buy rating with Rs 87 target

what happened

Brokerage Elara Securities kept its Buy rating on Ujjivan Small Finance Bank with a target price of Rs 87, implying 38% upside from the Rs 63 close on 16 October. In its report dated 17 October 2026, Elara said the bank's second-quarter FY27 profit rose sharply on revenue momentum, loan growth and lower credit costs.

Net interest margin fell by around 10 basis points quarter on quarter to 8.4%, reflecting a shift toward secured lending. Secured loans make up about 52% of the portfolio, and the bank targets 56% by the end of FY27. Loans grew 32.4% year on year and deposits 29.2%. The cost of funds stood at 6.9%, but the brokerage flagged a possible rise of about 10 basis points in the third quarter.

Elara also warned that potential caps on insurance commissions proposed by IRDAI could cut return on assets in FY28 by 10 to 20 basis points.

why it matters

For investors in India's lending sector, two factors stand out: funding costs that rise as repo rates increase, and regulatory moves on insurance commissions. These are Elara's estimates, and the market may weigh them differently.

market impact

Indian banks: strong loan growth and asset quality support the sector; funding costs and insurance commission rules are the risks

tags

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