Buy AU Small Finance Bank; target of Rs 875: Motilal Oswal

BUY

Motilal Oswal's research report on AU Small Finance Bank

RBI has granted in-principle approval to AU SFB (AUBANK) for its transition into a Universal Bank, marking a significant milestone in the bank’s journey. This approval follows the revised guidelines issued in Apr’24, which established a voluntary transition framework for eligible SFBs that meet capital norms, demonstrate five years of consistent operational performance, and successfully meet RBI's due diligence criteria. Having started operations in 2017, AUBANK became the first SFB to formally apply under this route. This transition underscores the regulator’s confidence in AU’s governance, execution track record, and institutional maturity.

Outlook

We reiterated our BUY rating on the stock with a TP of INR875, even as the bank delivered a 60% return over the prior quarter, as we awaited this approval and anticipated the franchise gaining strength in the coming years.

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AU Small Finance Bank_08082025_Motilal Oswal