Buy Equitas Small Finance Bank; target of Rs 72: Emkay Global Financial

Emkay Global Financial is bullish on Equitas Small Finance Bank has recommended buy rating on the stock with a target price of Rs 72 in its research report dated February 09, 2023.

Teena Virmani

March 08, 2023 / 13:58 IST

26 Aug, 2025 12:21

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Emkay Global Financial's research report on Equitas Small Finance Bank

Equitas SFB reported a beat on PAT at Rs1.7bn (vs our est. of Rs1.2bn) mainly on account of lower provisions, partly offset by flattish margins and higher staff expenses as the bank adds headcount to bolster business growth. Headline NPA ratio moderated to 6.3%, while Bank used Rs0.4bn from the contingent buffer (now at Rs0.6bn/03% of loans). Bank has posted strong credit growth at 27% YoY/7% QoQ, largely driven by healthy traction in MFI, VF, SBL and the corporate portfolio. Bank remains confident of delivering growth of ~25%, as demand outlook remains good. It is expanding into newer geographies for growth and has accelerated hiring; although this should keep staff cost elevated in the near term, but will improve business growth/return ratios in the long run. The Equitas SFB’s reverse merger with Equitas Holdings is nearing completion and Management expects the merged shares (swap ratio at 231:100) to be listed within the next 2 weeks. Further, Founder cum MD & CEO Mr. P N Vasudevan has decided to stay back with the bank and the Board has decided to renew his term for 3 years, from Jul-2023 (subject to RBI approval).

Outlook

Factoring-in the better growth/margins and lower LLP, we upgrade our earnings estimate for FY23/24/25 by 10%/3%/1%, respectively, leading to steady improvement in RoA/RoE to 1.7-2%/11-16% over FY23-25E. We retain BUY with revised TP of Rs72/share (up from Rs65 earlier), based on 1.5x Dec-24E ABV.

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