Buy

Post the management change in Mar’25 with Mr. Sanjay Garyali taking the charge as CEO of Fusion Finance, the company has focused on building blocks for a sustainable and resilient portfolio.

Equitas SFB (EQUITASB) reported 2QFY26 PAT at ~INR241m (87% YoY, miss to our estimate) vs. loss of INR2.2b in 1QFY26, owing to higher-than-expected provisions.

About the stock: CreditAccess Grameen is one of the largest microfinance companies in India, having over 3 decades of experience, over 25,904 crore AUM and a strong distribution channel to provide financial aid to low-income households. It operates in over 16 states and 1 UT with 2,209 branches, having a growing employee base of 21,701 Q2FY26 performance: CreditAccess Grameen reported a sequential recovery in Q2FY26, driven by margin expansion and lower credit cost. AUM was flat QoQ (3.1% YoY) as disbursements fell 2% QoQ amid weather disruptions and slower...

CreditAccess Grameen (CREDAG) guided ~70–100bp higher credit costs in FY26 and credit costs of 4.0-4.5% in FY27 (including 70–80bp higher provisions from the ECL revision).

We maintain our BUY recommendation on the stock.

AU Small Finance Bank (AUBANK) remains an attractive combination of growth and earnings as the bank navigates through the last leg of stress in the MFI and Cards segments.

We recommend a BUY on the stock with a target price of Rs 1,461/share, implying an upside of 10% from the CMP.

We believe at 1.2x FY27E ABV, the risk-reward is favourable and impeccable execution of the strategy should drive stock performance. We recommend a BUY on the stock with a target price of Rs 53/share, implying an upside of 20% from the CMP.

Ujjivan Small Finance Bank (Ujjivan) is amongst the few SFBs which had been successful in scaling loan portfolio to INR 333bn by Q1FY26 from INR 75bn in FY18 with an average credit cost of ~150bps (ex-Covid).

Spandana Sphoorty’s (SPANDANA) 1QFY26 loss stood at ~INR3.6b (vs. a loss of INR4.3b in 4QFY25). 1Q NII declined ~70% YoY to ~INR1.3b (~8% miss). Operating loss stood at INR587m (PQ: operating profit of INR251m).

We maintain our BUY recommendation on reasonable valuations.

Equitas SFB (EQUITASB) reported a net loss of INR2.24b vs our estimate of PAT of INR220m, driven by a sharp rise in provisions due to stress in MFI and changes in the provisioning policy.

We maintain our BUY recommendation on the stock

CreditAccess Grameen’s (CREDAG) 1QFY26 PAT stood at INR602m (vs. est. INR842m). NII declined ~2% YoY to ~INR9b (in line). PPOP fell ~8% YoY to INR6.5b (in line).

CA Grameen (Grameen) continued to improve on asset quality metrics in Q1FY26: monthly PAR 15+ accretion rate fell to 0.46% in Jun’25 vs. 0.84% in Mar’25 vs. 1.34% in Nov’24 and credit cost fell for the straight third quarter with total provisions at INR 5.7bn in Q1FY26 vs INR 5.8bn in Q4FY25 vs INR 7.5bn in Q3FY25.

We maintain our BUY recommendation on the stock.

We maintain our BUY recommendation on the stock.

AU Small Finance Bank (AUBANK) reported a 1QFY26 PAT of INR5.81b (5% beat; up 15% QoQ) amid robust other income and controlled opex.

Diversifying to secured segments; rebalancing unsecured book to relatively high-yield IL from MGL

Overall, FY25 has been tough owing to higher interest rates, tight liquidity, and high stress in unsecured loans. Profitability is expected to rebound from H2FY26 as headwinds recede on the margin and asset quality fronts.