Hold Equitas Small Finance Bank: target of Rs 60: ICICI Securities

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Strong operating performance: Equitas SFB's Q2FY27 results showed a 13bps QoQ expansion in RoA to 1.3% and 13.5% RoE, driven by robust 30% YoY credit growth and a 12bps QoQ reduction in cost-asset ratio.
  • Management transition risk: The resignation of MD & CEO Mr. P. N. Vasudevan due to perceived conflict of interest poses a near-term execution risk, despite the bank's strong H1FY27 performance.
  • Growth momentum: Advances growth guidance has been raised to >25% for FY27, driven by growth across products, including a shift towards used vehicles in the vehicle finance portfolio and rapid growth in gold loans.
  • Asset quality improvement: Asset quality continued to improve, with GNPA declining 13bps QoQ to 2.29% and NNPA stable at 0.70%.

Thesis Validation Checklist

  • Monitor management transition: The appointment of a new MD & CEO and the bank's ability to maintain its growth momentum and asset quality.
  • Track advances growth: Advances growth guidance of >25% for FY27 and the bank's ability to maintain its growth momentum across products.
  • Asset quality trends: Continued improvement in asset quality, with a focus on GNPA, NNPA, and credit cost.
  • NIM expansion: Recovery in NIM to ~7.1% in subsequent quarters, driven by deployment of excess liquidity into advances.