Negative on BFSI space; sell Equitas, Ujjivan; see up to 25% downside: Ambit Capital

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26 Aug, 2025 12:21

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Research firm Ambit Capital has a negative view on Banking, Financial services and Insurance (BFSI) segment with a sell recommendation on Equitas Holdings wherein the firm expects a downside of 25 percent with a target price of Rs 126.

The research firm has also rated Ujjivan Financial Services a sell with a downside of 23 percent for a target price of Rs 276.

Amit Capital believes that demonetisation disruption in micro finance led to YoY decline in Equitas and Ujjivan’s disbursements in the last three quarters resulting in assets under management (AUM) growth of 50-70 percent YoY slowing to 5-10 percent. The firm expects AUM growth to average at around 21 percent YoY led by non-microfinance and also expects that by the end of FY20 microfinance to form 18 percent of Equitas’ AUM and 77 percent for Ujjivan.

The research firm expects AUM CAGR of 21 percent over FY18-20E for both the companies. Inefficiencies in balance sheets and income reversals caused 350-370 bps NIIM compression last year while Opex rose by 60-80 percent YoY due to bank transaction related investments. However, the firm feels that headwinds are transient allowing ROE to recover to 14 percent by FY21-22E from less than 3 percent in FY18E.

Disbursements of Equitas and Ujjivan have been falling YoY after demonetisation in Q3FY17 which is more acute for Equitas. Delinquencies in microfinance loans would result in high credit cost in FY18E.

At 12:04 hrs Equitas Holdings was quoting at Rs 173.45, down Rs 1.65, or 0.94 percent. It has touched an intraday high of Rs 177.75 and an intraday low of Rs 173.40.

Ujjivan Financial Services was quoting at Rs 364.30, down Rs 2.25, or 0.61 percent. It has touched an intraday high of Rs 370.00 and an intraday low of Rs 361.00.