Kotak Securities has issued positive ratings for Deepak Nitrite and Ujjivan Small Finance Bank. The brokerage highlights Deepak Nitrite’s strong recent earnings in the phenolics business and Ujjivan SFB’s successful move toward a more diversified loan portfolio. Investors may consider the cyclical nature of chemical profits and the bank's target of increasing its share of secured loans.
Deepak Nitrite and Ujjivan Small Finance Bank have both received optimistic commentary from Kotak Securities as the brokerage evaluates their growth potential. For investors, understanding the drivers behind these views requires looking at both the immediate performance and the long-term strategic changes within each company.
Deepak Nitrite and the Phenolics Cycle
Deepak Nitrite, a prominent player in the Indian chemical industry, is seeing benefits from its phenolics business. Recent earnings performance was largely supported by favorable phenol price spreads, which expanded following global supply chain disruptions. The company has managed its raw material inventory effectively, allowing it to capture better margins during this period. Beyond these immediate results, the company is working on several capital-intensive projects. This includes the commercialization of MIBK in the current financial year and the launch of new fluorinated products expected by the third quarter. Looking further ahead, the company is also working on a large-scale integrated polycarbonate project targeted for 2028.
While these projects aim to move the company into higher-value product segments, investors should note the cyclical nature of the chemical industry. The brokerage report warns that the current profitability, driven by elevated phenol spreads, may eventually normalize as market conditions shift and customer pricing pressure increases. Managing the debt pressure associated with these large expansion projects while maintaining profitability through changing market cycles will be a key factor for the company moving forward.
Ujjivan SFB’s Shift to Secured Lending
Ujjivan Small Finance Bank is seeing a positive outlook due to its ongoing transformation from a microfinance-heavy lender into a more balanced financial institution. The bank has been actively reducing its reliance on pure microfinance loans by expanding into affordable housing, medium and small enterprise loans, and financial institution group lending. The goal is to reach a portfolio where 56% of its loans are secured by the end of fiscal year 2027.
This diversification strategy is reflected in the bank's recent performance, which saw a 27% growth in its loan book and a 36% increase in low-cost CASA deposits over the past year. Asset quality metrics, such as net Non-Performing Assets at 0.4%, indicate that the bank has managed to keep bad loans low despite the broader sector stress often seen in microfinance lending. Moving forward, investors may track whether the bank can maintain its 25% credit growth target for the coming year and if its return on assets can stay within the projected 1.6% to 1.8% range as it scales these new, secured lending segments.