Regulatory ageing under-provision in the Essar steel led to a better than expected profits. It did not provided provision of ` 52 bn - as in the previous quarter - in anticipation of its resolution visibility (though accelerated provision of ` 5bn was provided). We remain uncomfortable with this, as the resolution remains a thorn in the system. Another subtle giveaway is that it desires to take this account off its book by the end of the year – either by resolution or sale. Excluding this, its headline numbers improved with advance growth of 11% - domestic at 15% (on account of loan buyout), NIM expansion and improvement in GNPA. With RoA improving at 60 bps by FY21, we maintain accumulate. Underprovided credit costs remain a near term risk.
OutlookWe have factored an RoAs at 60 bps by FY21 on the back CAGR 27% in profits. Maintain Accumulate.
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