Equitas Holdings Ltd. share price target

Equitas Small Finance Bank (EQUITAS) reported an overall improvement in operating performance with higher-than-estimated PAT of INR1.08b (MOSLe: INR610m) for 3QFY22 led by higher NII growth and 45% QoQ decline in provisions. Business growth picked up due to healthy traction...

Equitas Small Finance Bank reported a PAT of INR119m (MOSLe: INR705m) impacted by higher opex and elevated provisions on account of restructuring. Business growth remains muted, with non-MFI AUM flat QoQ, while the MFI portfolio declined. Liability momentum continues to stay strong, with CASA ratio improving to 40%. On the asset quality front, slippages stood elevated as collections were impacted due to the second COVID wave. However, higher upgrades provided some support. GNPA/NNPA increased by 103bp/80bp QoQ, while...

Disbursements recovering; Focus on existing customer base To share a business update on trends related to disbursements, deposits accretion and moratorium proportion availed across segments, EQUITAS hosted an analyst call. Following are the key takeaways:...

17 May 2020 In 4QFY20, EQUITAS provided higher than required provisions toward COVID-19, which affected earnings despite strong NII/PPoP growth. Inspite of the lockdown in the last few days of Mar20, AUM growth was steady at 31% YoY. We remain cautious of EQUITAS asset quality trends in the near term as 98.3% of borrowers have availed moratorium (93% of portfolio value). We cut our FY21/FY22E PAT estimate to primarily factor in higher delinquency trend and moderation in loan growth. Maintain Buy. 4QFY20 PAT stood at ~INR430m (33% YoY decline, 41% below estimates) affected by higher provisions (INR996m) toward COVID-19. However, NII grew 35% YoY to INR4.2b led by gross AUM growth of 31% YoY. NIMs for FY20 improved by 56bp to 9.1%. During FY20, NII/PPoP/PAT grew ~30%/40%/16% YoY. Total opex increased 14% YoY to INR3.1b, led by ~28% YoY growth in staff expense while total revenues increased 26% YoY.

Lower other income, higher provisions lead to PAT miss: EQUITAS reported PAT of INR619m (+75% YoY), missing our estimate by 15% due to lower other income and higher provisions. Other income declined 6% YoY to INR578m on account of lower fees, as the bank did not sell any PSLC certificates in the quarter. PPoP increased 65% YoY, led by 35% YoY growth in NII (INR3.4b; in-line). Lending spreads/NIM shrank ~20bp/25bp QoQ to 10.5%/8.6%, as the cost of funds increased 10bp QoQ. Total opex increased 15% YoY to INR2.8b, mainly led by higher staff expense (+21% YoY). Cost-income ratio, thus, remained elevated at...

4 February 2019 of 198%/14% YoY/QoQ to INR1.2b (largely in line with our estimates), driven by 37%/16% YoY/QoQ growth in NII. Lending spreads improved 49bp QoQ to 11.2%, while NIM stood at 8.98% (+128bp QoQ) on the back of 62bp improvement in cost of funds. Total opex grew 17%/12% YoY/QoQ to INR2.6b (5% above MOSLe) led by 40% YoY growth in other opex (paid PSLC premium of INR238m). Cost- income ratio, thus, remains elevated at 68.2% (39bp QoQ decline). Total AUMs grew 41%/9% YoY/QoQ to INR108.6b, with share of microfinance AUM at 27.2% of total AUM v/s 32% in 3QFY18. However, on an absolute basis, MFI AUM registered 9% QoQ growth (20% YoY) to INR29.5b. Non-MFI AUM registered robust 50%/9% YoY/QoQ growth to INR79.

Strong signs of profitability pick-up driven by lower opex and credit costs Operating expenses have started stabilizing: Equitas (EQUITAS) reported PPoP growth of 62%/42% QoQ/YoY (INR675m, off a low base), driven by strong cost control (cost-to-income ratio declined to a multi-quarter low of 77%). Total income increased 6.5%/20.3% QoQ/YoY (NII growth of 12% YoY, other income growth of 111% YoY, driven by higher share of liability fees). Provisions were controlled at INR139m, leading to PAT of INR348m. Balance sheet de-risking continues: In keeping with the goal of reducing the...

Equitas posted a loss of Rs 300 mn in Q3FY18, as it accelerated provisions worth Rs 700 mn on its demonetization-hit microfinance portfolio. Consequently, PAT was sharply below our estimate of Rs 113 bn, as provisions were originally intended to be amortized over few quarters. Asset quality improved

We maintain Neutral stance with a TP of Rs 165 (2.3x Dec'19E ABV). Equitas 3QFY18 performance came in largely in-line with our expectations. The loan book grew by 5.4% QoQ (7.5% YoY), as the company continued to focus on the Non-MF (secured) book. CASA growth was very strong at 37.5%, and contributed 14.6% to total interest liabilities.

Equitas (EQUITAS) reported a loss of INR300m, as the bank chose to provide completely on its delinquent micro finance (MF) book, increasing the coverage ratio on the latter to 96%. PPoP declined 7% QoQ, as total income (INR2.7b) growth of 4% QoQ lagged opex growth of 6% QoQ (INR2.3b). The bank provided a total of INR869m during the quarter (INR700m toward MF book), effectively up-fronting all credit costs on the same. Balance sheet de-risking continues:In line with the goal of diversifying the loan book, micro finance AUMs fell to 32% of total v/s 36% in 2QFY18, as MF AUM declined 6.6% QoQ to INR24.7b, while vehicle finance and M-LAP/LAP AUMs grew 4.2% and 11.5% QoQ, respectively. Total AUM/loan book grew 7.5%/22.2% YoY (securitized book share fell to 6.8%). Unsecured AUMs fell to 36% v/s 39% in 2Q, with robust growth in secured lending products.

Q2FY18 was weak marked by sluggish growth in loan book (~14% YoY) and further deterioration in asset quality (GNPAs up 85 bps QoQ at 5.76%). Consequently, PAT was 76 YoY lower than estimate (Rs 109 mn).

We maintain our NEUTRAL stance with a TP of Rs 160 (2.25x Sept'19E ABV). Equitas 2QFY18 performance came in largely in-line with our expectations. The loan book grew by 4.1% QoQ (3.5% YoY), as the company continued to focus on the Non-MF (secured) book. The share of the MFI book further declined to 36% from 42% in 1QFY18. Collection efficiency of the MF book stood at 94.6%. Operating cost declined 4% QoQ.

Equitas reported a weak Q1FY18 due to moderation in AUM growth (7% YoY), significant decline in margin (down 70 bps QoQ at 9.1%) and deterioration in asset quality (GNPAs up 138 bps QoQ at 4.9%).

We downgrade to NEUTRAL with a lower TP of Rs 150 (2.25x FY19E ABV). Equitas 1QFY18 performance was muted, owing to the twin impact of a decline in growth of the MFI segment and higher operating costs of liability branches. Collection efficiency of the MFI book stood at 94.6%. Disbursements were almost flat QoQ, owing to caution exercised in the MFI portfolio. AUM declined marginally QoQ at Rs 70.4bn, while NII declined by 10.5/4.8% QoQ/YoY. Non-interest Income was up sharply, owing to PSLC fee income of Rs 600mn. Opex cost further increased by 17.5% QoQ, owing to the rollout of 51 new liability branches, along with new products.

Q4FY17 was subdued due to moderation in AUM growth, significant decline in margin and further deterioration in headline asset quality. Additionally, higher operating expenses (due to opening of liability branches)

Equitas 4QFY17 performance was muted, as the MFI segment continued to be impacted by lower collections post demonetisation. Collection efficiency of the MFI book stood at 95.8% (98.4% in 3QFY17), as compared to the normal level of 99% . Disbursements were down QoQ, owing to a cautious stance on the MFI portfolio, whose share declined 350bps to 45.3%.

Equitas Holdings, headquartered in Tamil Nadu, is a lender to underserved segments in urban, semi-urban and rural India. With an AUM of Rs 72bn, it provides Microfinance, Used CV Vehicles, MSE and Housing Finance loans.

Equitas reported Q3FY17 PAT of Rs 449 mn, up ~4% YoY, in line with our estimate. NII growth was strong at 51% YoY with NIM at 10.5%. Operating expenses rose ~80% YoY,as SFB transition costs continued. Provisions doubled YoY, as it made additional provisions of ~Rs 150 mn to combat collection delays ..

We interacted with the senior management of Equitas to assess the impact of demonetization on its business. Equitas transitioned into a small finance bank in Q2FY17, and as a bank could accept deposits in the form of demonetized 500/1000 rupee notes.

Equitas Holdings (Equitas) reported a strong set of results for 1QFY2017. Its AUM grew by 48% yoy which led to a PAT growth of 64% yoy to Rs61cr, both beating our expectations. The Management remains confident of sustenance of business growth in the years to come and expects to start the small finance bank (SFB) by 2QFY2017 end. AUM growt..