Buy AU Small Finance Bank; target of Rs 1250: Motilal Oswal

Motilal Oswal is bullish on AU Small Finance Bank recommended buy rating on the stock with a target price of Rs 1250 in its research report dated March 09, 2026.

Broker Research

March 10, 2026 / 09:01 IST

Buy

Motilal Oswal's research report on AU Small Finance Bank

AU Small Finance Bank (AUBANK) has successfully transitioned from a niche vehiclefinance NBFC into a diversified, pan-India banking franchise, set to attain universal bank status. This marks a shift from asset-led growth to a scalable, diversified, and structurally stronger compounding franchise with enhanced credibility and funding access. The bank has established itself as the clear leader in the SFB space, with M-cap over 2x that of all SFB peers combined, supported by superior scale and consistent profitability. With a strong SFB platform already built, the transition to a universal bank unlocks larger growth opportunities while providing greater portfolio flexibility and the potential for stronger returns. We estimate AUBANK to deliver ~24% loan CAGR over FY26-28, which, combined with improving operating metrics, should translate into ~36% earnings CAGR over the same period, reinforcing the bank’s trajectory toward stronger profitability. RoA/RoE for FY27 are likely to improve to 1.74%/17.2%, respectively.

Outlook

Reiterate BUY with a TP of INR1,250 (3.7x Sep’27E ABV). Key upside triggers include accelerating earnings momentum driven by lower CoF and credit costs, a potential capital raise in FY27, and the transition to universal banking, following RBI’s relaxation of the earlier NOFHC stipulation for promoter shareholding, thereby simplifying the ownership structure and removing a key overhang.

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