Equitas Small Finance Bank - Robust Growth To Drive Continued Re-Rating: Motilal Oswal

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Equitas Small Finance Bank Ltd. reported strong profitability in FY23, with return on asset expanding to 1.9% (average of 2.2% in H2 FY23). It was driven by steady margins, healthy loan growth and controlled credit costs. The bank focuses on building a diversified loan book, with small business loans, vehicle finance, microfinance and housing finance being the key business segments. Loan growth was strong at 33% in FY23, and we estimate a robust 27% compound annual growth rate in loans over FY23-25.Equitas Small Finance Bank has made good progress in building a granular liability franchise, with a rising mix of retail deposits. The current account and savings account mix is healthy at 42.3%. We expect deposit traction to remain strong even as the CASA mix declines further.It has demonstrated a strong improvement in asset quality, with X bucket collection efficiency improving to pre-Covid levels and gross non-performing asset/net non-performing asset ratios moderating to 2.8%/1.2% as of Q4 FY23. We expect asset quality ratios to improve further and expect provision coverage ratio to improve to 70% by FY25 (over 1,400 basis point PCR improvement in FY23). We estimate Equitas Small Finance Bank to deliver FY25E return on asset/return on equity of 2.1%/16.7% and value it at Rs 105 (1.7 times March-25E book value)..Click on the attachment to read the full report:.Gillette India - New Engines Could Drive Stronger Growth: Nirmal Bang.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Equitas Small Finance Bank - Robust Growth To Drive Continued Re-Rating: Motilal Oswal

Asset quality to improve further; estimate return on asset to sustain at more than 2%.

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