27 January 2024

3QFY24 Results Update | Sector: Financials

Equitas Small Finance

Estimate change CMP: INR106 TP: INR125 (+18%) Buy
TP change
Earnings in line; business growth remains healthy
Rating change
Asset quality ratios deteriorate
Bloomberg EQUITASB IN
 Equitas Small Finance Bank (EQUITASB) reported in-line earnings for
Equity Shares (m) 1113 3QFY24 at INR2b (up 18.7% YoY). PPoP grew 29% YoY (up 9% QoQ, in line),
M.Cap.(INRb)/(USDb) 120.4 / 1.4 led by high other income.
52-Week Range (INR) 117 / 52  AUM growth was steady at 32% YoY/5% QoQ to INR328b, driven by healthy
1, 6, 12 Rel. Per (%) 0/2/75
traction in most of the segments (barring NBFC). The management expects
12M Avg Val (INR M) 555
credit growth to remain robust at 25-28% in FY24.
Financials & Valuations (INR b)
 Deposit growth was robust at 38% YoY/5% QoQ, led by faster growth in
Y/E March FY23 FY24E FY25E TDs. The CASA mix moderated 85bp QoQ to 32.7%. The cost of funds, thus,
NII 25.4 31.0 37.2 rose 15bp QoQ to 7.4%, leading to a 6bp drop in NIMs to 8.37%.
OP 11.8 13.8 16.5  Slippages were elevated mainly due to higher slippages from vehicle finance
NP 5.7 8.1 9.5
and micro finance. GNPA/NNPA ratios increased 26bp/16bp QoQ to
NIM (%) 9.0 8.4 7.9
EPS (INR) 4.9 7.2 8.4 2.53%/1.13%. PCR declined slightly to 56%.
BV/Sh. (INR) 46 52 59  We maintain our FY24E/FY25E EPS and estimate FY25 RoA/RoE of
ABV/Sh. (INR) 44 50 57 1.9%/15.3%. Maintain BUY with a TP of INR125 (2.0x Sep’25E ABV).
Ratios
RoE (%) 12.2 14.7 15.3
Business growth steady; NIMs compress 6bp QoQ
RoA (%) 1.9 2.0 1.9
Valuations  EQUITASB reported PAT of INR2b (up 18.7% YoY). NII grew 21% YoY to
P/E(X) 21.8 14.7 12.6 INR7.85b (in line). Provisions increased 69% YoY/34% QoQ to INR0.84b (9%
P/BV (X) 2.3 2.0 1.8 higher than our estimate).
P/ABV (X) 2.4 2.1 1.9  Other income grew 35% YoY/13% QoQ as fee income grew 24% YoY and
Treasury income stood at INR300m (vs. INR180m in 2QFY24).
Shareholding pattern (%)  Opex grew 21% YoY/2.2% QoQ to INR6.3b, leading to a decline in the C/I
As On Dec-23 Sep-23 Dec-22 ratio to 63.6%. PPoP, thus, grew 29% YoY/9.1% QoQ to INR3.6b.
Promoter 0.0 0.0 74.5  Total AUM jumped 32% YoY (5% QoQ) to INR328b, led by healthy traction
DII 45.7 43.9 15.4
across segments (barring NBFC). Disbursements stood at INR47.4b in
FII 19.6 18.2 4.1
3QFY24, down 4.5% QoQ. Small business loans/vehicle finance grew 6%/4%
Others 34.8 35.6 6.1
FII Includes depository receipts
QoQ, and micro finance growth stood at ~32% YoY (+3% QoQ). Housing
finance grew at a robust 8.4% QoQ. The share of MFI AUM stood at 18.5%
(vs. 18.8% in 2QFY24).
 Deposits jumped 38% YoY to ~INR324b, led by 6% QoQ growth in term
deposits. The CASA ratio, thus, moderated 85bp QoQ to 32.7%, down from
its peak of 52% in 4QFY22. The management has guided for a CD ratio of
~85% by FY25 vs. 90% in 3QFY24.
 On the asset quality front, slippages were elevated at INR3.1b (4.8%
annualized) due to heavy floods in Tamil Nadu and high slippages in vehicle
finance and micro finance. GNPA/NNPA ratios increased 26bp/16bp QoQ to
2.53%/1.13%. PCR declined slightly to 56%.

Nitin Aggarwal - Research Analyst (Nitin.Aggarwal@MotilalOswal.com)

14 January
Research 2020 Dixit Sankharva (Dixit.Sankharva@MotilalOswal.com) | Disha Singhal (Disha.Singhal@MotilalOswal.com)
Analyst: 1
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and
 Equitas Small Finance

Highlights from the management commentary

 The management guides for a healthy credit growth of 25-28% for FY24.
 EQUITASB has given a CD ratio guidance of ~85% by FY25.
 Disbursement yields have improved, with yields at 18.8% in 3QFY24. SBL –
17.16%, MFI-25%, Used CV at 19.56%, New CV at 13.69%.
 During 3QFY24, the bank securitized/assigned advances worth INR13.9b.
 The profit on the sale of investments for the quarter was INR269m. Income from
the sale to ARC stood at INR700m.

Valuation and view

EQUITASB reported a mixed performance with strong AUM growth driven by
healthy traction across segments however slippages increased while NIMs declined
slightly. Deposit growth remained robust, fueled by healthy growth in retail term
deposits, although the CASA mix deteriorated sharply over the past year. While
margins are likely to moderate further in 4QFY24, the rise in disbursement yields
and the nearing end of deposit re-pricing would help the bank limit the impact.
Asset quality deteriorated further amid higher slippages and lower recoveries. The
bank has guided for a moderation in slippage run rate as collection efficiency
improves. It expects credit cost at ~1.25% in FY24. We maintain our FY24E/FY25E
EPS and estimates FY25 RoA/RoE of 1.9%/15.3%. Maintain BUY with a TP of INR125
(premised on 2.0x Sep’25E ABV).

Quarterly performance (INR m)

Y/E March FY23 FY24E FY23E v/s
FY23 FY24E
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE 3QE Est
Net Interest Income 5,806 6,097 6,475 7,070 7,431 7,656 7,851 8,044 25,447 30,983 7,895 -1
% Change (YoY) 25.9 26.0 19.7 28.0 28.0 25.6 21.3 13.8 24.8 21.8 21.9
Other Income 1,332 1,450 1,526 2,387 1,714 1,814 2,055 2,319 6,696 7,901 1,916 7
Total Income 7,138 7,547 8,001 9,456 9,145 9,470 9,906 10,363 32,143 38,884 9,811 1
Operating Expenses 4,456 5,124 5,210 5,593 6,024 6,168 6,303 6,561 20,383 25,056 6,290 0
Operating Profit 2,682 2,423 2,791 3,864 3,121 3,302 3,603 3,802 11,760 13,828 3,521 2
% Change (YoY) 63.1 21.8 24.2 36.1 16.4 36.3 29.1 -1.6 34.9 17.6 26.1
Provisions 1,416 901 499 1,256 601 632 844 945 4,072 3,022 777 9
Profit before Tax 1,266 1,522 2,292 2,608 2,521 2,670 2,759 2,857 7,688 10,807 2,744 1
Tax 296 358 591 707 609 689 739 684 1,952 2,720 692 7
Net Profit 970 1,164 1,701 1,900 1,912 1,982 2,020 2,173 5,736 8,087 2,053 -2
% Change (YoY) 713.4 182.6 57.4 59.0 97.1 70.2 18.7 14.4 104.3 41.0 20.7
Operating Parameters
AUM (INR b) 217 228 249 279 296 312 328 345 279 345 330 -1
Deposits (INR b) 204 217 234 254 277 308 324 348 254 348 326 -1
Loans (INR b) 205 218 233 258 275 288 292 320 258 320 305 -4
AUM Growth (%) 22 20 27 35 36 37 32 24 35 24
Deposit Growth (%) 19 20 31 34 36 42 38 37 34 37
Loan Growth (%) 22 22 27 33 34 32 25 24 33 24
Asset Quality
Gross NPA (%) 4.1 3.9 3.6 2.8 2.8 2.3 2.5 2.4 2.8 2.4
Net NPA (%) 2.2 2.0 1.8 1.2 1.2 1.0 1.1 1.0 1.2 1.0
PCR (%) 48.5 50.5 50.8 56.9 57.8 57.7 56.0 56.9 56.9 56.9

27 January 2024 2
 Equitas Small Finance

Quarterly snapshot
FY23 FY24 Change (%)
Profit and Loss, INRm
1Q 2Q 3Q 4Q 1Q 2Q 3Q YoY QoQ
Net Interest Income 5,806 6,097 6,475 7,070 7,431 7,656 7,851 21 3
Other Income 1,332 1,450 1,526 2,387 1,714 1,814 2,055 35 13
Trading profits 70 70 80 80 290 180 300 275 67
Core Fees 670 840 950 1,720 910 1,050 1,180 24 12
Total Income 7,138 7,547 8,001 9,456 9,145 9,470 9,906 24 5
Operating Expenses 4,456 5,124 5,210 5,593 6,024 6,168 6,303 21 2
Employee 2,257 2,751 2,920 3,039 3,279 3,315 3,460 19 4
Others 2,200 2,373 2,290 2,553 2,745 2,853 2,843 24 0
Operating Profits 2,682 2,423 2,791 3,864 3,121 3,302 3,603 29 9
Core Operating Profits 2,612 2,353 2,711 3,784 2,831 3,122 3,303 22 6
Provisions 1,416 901 499 1,256 601 632 844 69 34
PBT 1,266 1,522 2,292 2,608 2,521 2,670 2,759 20 3
Taxes 296 358 591 707 609 689 739 25 7
PAT 970 1,164 1,701 1,900 1,912 1,982 2,020 19 2
Balance Sheet (INRb)
Deposits 204 217 234 254 277 308 324 38 5
Loans 205 218 233 258 275 288 292 25 2
AUM's 217 228 249 279 296 312 328 32 5
Loan mix (%)
MFI 18.5 18.2 18.5 18.8 19.0 18.8 18.5 1 -35
Vehicles 24.3 24.8 24.9 25.0 24.8 24.9 24.7 -20 -21
Small Business loans (incl HF) 46.4 47.6 47.3 46.5 47.3 48.5 49.3 207 88
MSE Finance 5.2 5.1 4.7 4.2 3.7 3.3 3.6 -114 24
Corporate loans 3.2 3.1 3.5 4.2 4.0 3.3 2.7 -79 -63
Others 2.5 1.2 1.2 1.3 1.2 1.2 1.2 6 7
Asset Quality FY23 FY24 Change (bp)
(INRb) 1Q 2Q 3Q 4Q 1Q 2Q 3Q YoY QoQ
GNPA 8.6 8.7 8.6 7.2 7.7 6.6 7.5 -13 14
NNPA 4.4 4.3 4.2 3.1 3.3 2.8 3.3 -22 18
Slippages 3.0 3.1 2.9 1.9 2.1 2.6 3.1 9 22
Ratios (%) FY23 FY24 Change (bp)
Asset Quality Ratios 1Q 2Q 3Q 4Q 1Q 2Q 3Q
GNPA (%) 4.1 3.9 3.6 2.8 2.8 2.3 2.5 -110 26
NNPA (%) 2.2 2.0 1.8 1.2 1.2 1.0 1.1 -69 16
Slippage ratio 6.4 6.3 5.5 3.0 3.6 4.1 4.8 -75 70
PCR (Calc, %) 48.5 50.5 50.8 56.9 57.8 57.7 56.0 513 -175
Credit Cost 2.8 1.8 0.9 2.0 0.9 1.0 1.2 28 17
Business Ratios (%)
Loan/Deposit 100.5 100.5 99.5 101.6 99.3 93.3 90.2 -930 -309
CASA 51.7 48.1 46.2 42.3 38.4 33.6 32.7 -1,353 -85
Cost to Income 62.4 67.9 65.1 59.1 65.9 65.1 63.6 -149 -150
Cost to assets 6.7 7.4 7.3 7.2 7.3 7.0 6.9 -43 -18
Tax Rate 23.4 23.5 25.8 27.1 24.1 25.8 26.8 101 100
Profitability Ratios (%)
Cost of Funds 6.2 6.3 6.4 6.6 6.9 7.2 7.4 95 15
Margins 9.1 9.0 9.0 9.1 8.8 8.4 8.4 -64 -6
ROA 1.4 1.6 2.2 2.3 2.1 2.0 2.2 -1 17
ROE 9.0 10.6 14.9 15.5 14.5 14.6 14.4 -50 -18

27 January 2024 3
 Equitas Small Finance

Highlights from the management commentary

Operating environment, balance sheet and P&L
 AUM growth was healthy at 32% YoY/5% QoQ, with growth across all business
segments.
 NIM stood at 8.37%, impacted by increased balance sheet liquidity as the CD
ratio improved.
 About 77% of incremental deposits in 3Q came from retail term deposits.
 EQUITAS sees good demand across all product segments. All lead indicators
remain healthy and give comfort about a healthy growth pace going forward.
 On the CV segment, the bank focuses on LCV and small CV. In used cars, the
bank focuses on personal used cars.
 The CASA ratio moderated 85bp QoQ to 32.7% and the bank expects CASA to
remain under pressure going forward as well.
 NII grew 21% YoY, other income grew 35% YoY, Opex grew by 21% YoY, and the
C/I ratio declined to 63.6%. PPoP grew 29% YoY. PAT grew 19% YoY.
 RoA stood at 1.98% and RoE stood at 14.4%.
 CRAR was healthy at 20.2%, Tier 1 stood at 19.7%, and Tier 2 stood at 0.6%.
 The bank expects that interest rates could marginally go down in the next
quarter, which may dent margins. It expects NIMs to improve from next
financial year if the interest rate remains stable.
 Interest rates have increased in SBL, vehicle finance and MFI book. Affordable
housing has seen a marginal hike in interest rates in the current quarter.
 The bank’s ability to raise retail deposits has been stable and is strengthening on
the basis of prices it offers. So the bank is confident of acquiring retail deposits.
 In Q3FY24, the bank securitized/assigned advances worth INR13.9b.
 Bulk term deposits accounted for only ~23% of incremental deposits.
 ~85% of the portfolio is fixed rate loans with an average tenure of 2.5 years.
 Disbursement yields improved, with yields at 18.8% in Q3FY24. SBL –17.16%,
MFI-25%, Used CV at 19.56%, New CV at 13.69%.
 The bank has adequate eligible advances available to raise funds through
refinance or IBPC whenever required, which provides strong cushion to ALM
position of the bank.
 The profit from the sale of investments was INR269m. Income from the sale to
ARC stood at INR700m.
 The bank expects the cost of branch expansion to be very low going forward,
but it will be investing in tech, and therefore the cost will remain at the current
level.
 In SBL business growth, non-Tamil-Nadu disbursements rose 46% YoY in 3Q.
 The bank remains comfortable about liquidity, with LCR of 211.6%.

Asset quality
 GNPA increased to 2.5%, NNPA at 1.1%, PCR remained at 56% in 3QFY24.
 Slippages were high due to heavy floods in Tamil Nadu and high slippages in
vehicle finance and micro finance.
 Collection efficiency for the bank will remain healthy in 4Q.
 9MFY24 credit cost run rate is 90bp. Credit cost stood at 1.05% in 3QFY24.
 Normal slippage run rate is 3-4%. Including securitization book, GNPA would
stand at 2.29%.

27 January 2024 4
 Equitas Small Finance

 The increase in disbursement yield of SBL has not led to deterioration in asset
quality.
 The bank is not seeing any stress in the portfolio and should be consistent. It
expects the credit cycle to be good in FY24.

Guidance
 The bank guides for healthy growth in advances in the range of 25-28% for FY24.
 It expects a CD ratio of ~85% by FY25.
 Credit cost guidance for FY24 stood at ~1.25%.
 The bank retains its earlier NIM guidance of 8.5% for FY24.
 The bank expects the interest cost to move up in FY25. The bank has increased
interest rates in the last few months, which will have benefits going forward.
The bank expects disbursements to stay strong, which will result in better fee
income.
 The banks expected to sustain RoA at 2.25%; it has been able to maintain RoA at
this level in the past too.

27 January 2024 5
 Equitas Small Finance

Story in Charts
Exhibit 1: AUM showed a healthy growth of 32% YoY Exhibit 2: Deposits grew 38% YoY/5% QoQ to INR324b

AUM (INR b) YoY Growth (%) Deposit (INR b) YoY growth (%)
37 40 42
36 36 38
35 32 34
31
27
22 20 20
19
13 13 15 16
13

190 197 206 217 228 249 279 296 312 328 181 179 190 204 217 234 254 277 308 324
2QFY23
2QFY22

3QFY22

4QFY22

1QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

1QFY23
2QFY22

3QFY22

4QFY22

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24
Source: MOFSL, Company Source: MOFSL, Company

Exhibit 3: NIMs moderated 6bp QoQ to 8.37% Exhibit 4: Credit cost stood at 1.2% in 3QFY24

Margins (%) Credit Cost

8.37
8.1

9.1

9.1

9.1

9.0

9.0

9.1

8.8

8.4

3.4

1.8

2.6

2.8

1.8

0.9

2.0

0.9

1.0

1.2
2QFY22

3QFY22

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24
2QFY22

3QFY22

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

Source: MOFSL, Company Source: MOFSL, Company

Exhibit 5: GNPA/NNPA ratios increased to 2.5%/1.1% in

3QFY24 Exhibit 6: C/I ratio declined to 63.6% in 3QFY24
CI ratio (%) Cost to assets (%)
GNPA (%) NNPA (%) PCR (%)

57 58 58 56
50 47 48 50 51
43 7.2 7.1 7.4 7.3 7.2 7.3 7.0 6.9
6.5 6.7
68.7

66.7

59.5

62.4

67.9

65.1

59.1

65.9

65.1

63.6
2.0
4.8
2.5
4.6
2.5
4.2
2.5
4.1
2.2
3.9

3.6
1.8
2.8
1.2
2.8
1.2
2.3
1.0
2.5
1.1

2QFY22

3QFY22

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24
2QFY23
2QFY22

3QFY22

4QFY22

1QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

Source: MOFSL, Company Source: MOFSL, Company

27 January 2024 6
 Equitas Small Finance

Valuation and view

 EQUITASB reported a mixed performance with strong AUM growth driven by
healthy traction across segments however slippages increased while NIMs
declined slightly. Deposit growth remained robust, fueled by healthy growth in
retail term deposits, although the CASA mix deteriorated sharply over the past
year. While margins are likely to moderate further in 4QFY24, the rise in
disbursement yields and the nearing end of deposit re-pricing would help the
bank limit the impact. Asset quality deteriorated further amid higher slippages
and lower recoveries. The bank has guided for a moderation in slippage run rate
as collection efficiency improves. It expects credit cost at ~1.25% in FY24. We
maintain our FY24E/FY25E EPS and estimates FY25 RoA/RoE of 1.9%/15.3%.
Maintain BUY with a TP of INR125 (premised on 2.0x Sep’25E ABV).

Exhibit 7: DuPont analysis

FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Interest Income 14.5 15.1 14.5 13.4 13.4 13.7 13.7 13.5
Interest Expense 6.6 6.6 6.3 5.5 5.2 6.0 6.3 6.2
Net Interest Income 7.93 8.53 8.17 7.89 8.22 7.77 7.34 7.33
Fee income 1.92 1.59 1.70 1.92 2.09 1.84 1.74 1.66
Trading and others 0.02 0.02 0.20 0.17 0.07 0.14 0.11 0.09
Other Income 1.95 1.61 1.90 2.08 2.16 1.98 1.85 1.75
Total Income 9.87 10.14 10.07 9.97 10.38 9.75 9.19 9.08
Operating Expenses 6.94 6.73 6.04 6.60 6.58 6.28 5.95 5.71
Employees 3.79 4.05 3.60 3.48 3.54 3.35 3.19 3.09
Others 3.15 2.68 2.45 3.12 3.04 2.93 2.76 2.63
Operating Profits 2.93 3.41 4.03 3.38 3.80 3.47 3.24 3.37
Core operating Profits 2.91 3.39 3.83 3.21 3.73 3.32 3.13 3.28
Provisions 0.70 1.41 1.71 1.91 1.32 0.76 0.73 0.79
NPA 0.61 0.75 1.97 1.32 1.50 0.70 0.67 0.73
Others 0.09 0.65 -0.26 0.59 -0.18 0.06 0.06 0.06
PBT 2.23 2.00 2.32 1.46 2.48 2.71 2.51 2.58
Tax 0.78 0.61 0.58 0.38 0.63 0.68 0.63 0.65
RoA 1.45 1.39 1.75 1.09 1.85 2.03 1.88 1.93
Leverage (x) 6.8 7.0 7.2 6.8 6.6 7.2 8.1 8.9
RoE 9.8 9.7 12.5 7.3 12.2 14.7 15.3 17.2

27 January 2024 7
 Equitas Small Finance

Financials and valuations

Income Statement (INRm)
Y/E March FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Interest Income 21,119 26,454 31,944 34,597 41,619 54,784 69,455 86,625
Interest Expense 9,602 11,501 13,965 14,211 16,172 23,802 32,206 39,708
Net Interest Income 11,517 14,953 17,980 20,385 25,447 30,983 37,249 46,917
Growth (%) 33.8 29.8 20.2 13.4 24.8 21.8 20.2 26.0
Non-Interest Income 2,829 2,824 4,181 5,376 6,696 7,901 9,402 11,189
Total Income 14,346 17,777 22,160 25,761 32,143 38,884 46,651 58,106
Growth (%) 30.2 23.9 24.7 16.2 24.8 21.0 20.0 24.6
Operating Expenses 10,085 11,801 13,294 17,041 20,383 25,056 30,201 36,564
Pre Provision Profits 4,261 5,976 8,866 8,719 11,760 13,828 16,451 21,541
Growth (%) 93.1 40.2 48.4 -1.7 34.9 17.6 19.0 30.9
Core PPoP 4,229 5,942 8,419 8,293 11,546 13,262 15,885 20,975
Growth (%) 83.1 40.5 41.7 -1.5 39.2 14.9 19.8 32.0
Provisions (excl tax) 1,024 2,466 3,753 4,938 4,072 3,022 3,711 5,064
PBT 3,237 3,509 5,113 3,781 7,688 10,807 12,740 16,477
Tax 1,132 1,073 1,270 974 1,952 2,720 3,207 4,147
Tax Rate (%) 35.0 30.6 24.8 25.8 25.4 25.2 25.2 25.2
PAT 2,106 2,436 3,842 2,807 5,736 8,087 9,533 12,330
Growth (%) 561.4 15.7 57.7 -26.9 104.3 41.0 17.9 29.3

Balance Sheet
Y/E March FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Equity Share Capital 10,059 10,534 11,393 12,520 11,106 11,316 11,316 11,316
Reserves & Surplus 12,484 16,907 22,571 29,941 40,474 47,216 55,051 65,684
Net Worth 22,543 27,441 33,963 42,462 51,579 58,531 66,367 76,999
Deposits 90,067 1,07,884 1,63,920 1,89,508 2,53,806 3,47,714 4,58,982 5,87,497
Growth (%) 60.7 19.8 51.9 15.6 33.9 37.0 32.0 28.0
of which CASA Dep 22,743 22,082 56,138 98,554 1,07,319 1,10,921 1,47,333 1,94,461
Growth (%) 38.9 -2.9 154.2 75.6 8.9 3.4 32.8 32.0
Borrowings 39,730 51,349 41,653 26,164 29,738 25,277 22,244 25,135
Other Liabilities & Prov. 5,286 6,281 7,548 11,385 14,459 16,627 19,454 22,956
Total Liabilities 1,57,626 1,92,955 2,47,085 2,69,519 3,49,581 4,48,149 5,67,047 7,12,588
Current Assets 12,606 25,368 33,787 21,325 12,443 24,617 32,723 41,659
Investments 23,445 23,425 37,052 44,498 66,646 87,306 1,14,371 1,48,682
Growth (%) -39.2 -0.1 58.2 20.1 49.8 31.0 31.0 30.0
Loans 1,15,935 1,37,282 1,68,482 1,93,742 2,57,986 3,19,902 3,96,679 4,93,865
Growth (%) 50.4 18.4 22.7 15.0 33.2 24.0 24.0 24.5
Fixed Assets 2,373 2,128 1,851 2,004 3,791 6,445 8,379 10,892
Other Assets 3,267 4,752 5,914 7,949 8,716 9,879 14,895 17,490
Total Assets 1,57,626 1,92,955 2,47,085 2,69,519 3,49,581 4,48,149 5,67,047 7,12,588
Total AUM 1,17,043 1,53,660 1,79,250 2,05,970 2,78,610 3,45,476 4,28,391 5,33,346
Growth (%) 42.1 31.3 16.7 14.9 35.3 24.0 24.0 24.5

Asset Quality FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
GNPA (INR m) 2,957 4,173 6,427 8,371 7,240 7,792 9,002 11,093
NNPA (INR m) 1,864 2,286 2,662 4,795 3,120 3,357 3,348 3,794
Slippage (INR m) 3,173 4,093 5,894 13,893 10,871
GNPA Ratio 2.53 3.00 3.73 4.24 2.76 2.40 2.24 2.21
NNPA Ratio 1.61 1.67 1.58 2.47 1.21 1.05 0.84 0.77
Slippage Ratio 3.29 3.23 3.86 7.67 4.81 4.10 3.60 3.30
Credit Cost 0.81 1.61 2.07 2.19 1.41 0.96 0.95 1.05
PCR (Excl Tech. write off) 36.9 45.2 58.6 42.7 56.9 56.9 62.8 65.8

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Financials and valuations

Ratios
Y/E March FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Yield and Cost Ratio (%)
Avg. Yield- on Earning Assets 15.5 16.0 15.3 14.6 14.8 14.8 14.8 14.7
Avg. Yield on loans 18.9 19.1 19.0 17.3 16.7 17.0 17.2 17.1
Avg. Yield on Investments 8.3 6.7 7.3 6.1 5.7 6.5 6.7 6.9
Avg. Cost of Int. Bear. Liab. 8.1 8.0 7.7 6.7 6.5 7.3 7.5 7.3
Avg. Cost of Deposits 7.0 7.5 7.1 6.4 6.1 6.8 7.2 7.0
Interest Spread 7.5 8.1 7.7 7.9 8.3 7.5 7.3 7.4
NIM (on IEA) 8.5 9.1 8.6 8.6 9.0 8.4 7.9 8.0

Capitalisation Ratios (%)

CAR 22.4 23.6 24.2 25.2 23.8 22.1 20.7 19.7
Tier I 20.9 22.4 23.2 24.5 23.1 21.5 20.2 19.3
Tier II 1.5 1.2 1.0 0.6 0.7 0.6 0.5 0.4
CET-1 22.4 23.2 24.5 23.1

Business and Efficiency Ratios (%)

Loans/Deposit Ratio 128.7 127.2 102.8 102.2 101.6 92.0 86.4 84.1
CASA Ratio 25.3 20.5 34.2 52.0 42.3 31.9 32.1 33.1
Cost/Assets 6.4 6.1 5.4 6.3 5.8 5.6 5.3 5.1
Cost/Total Income 70.3 66.4 60.0 66.2 63.4 64.4 64.7 62.9
Cost/Core income 70.5 66.5 61.2 67.3 63.8 65.4 65.5 63.5
Int. Expense/Int.Income 45.5 43.5 43.7 41.1 38.9 43.4 46.4 45.8
Fee Income/Total Income 19.5 15.7 16.8 19.2 20.2 18.9 18.9 18.3
Non Int. Inc./Total Income 19.7 15.9 18.9 20.9 20.8 20.3 20.2 19.3
Empl. Cost/Total Expense 54.7 60.1 59.5 52.7 53.8 53.4 53.6 54.0
Business per Employee (INR m) 20.1 21.8 24.9 29.5 34.1 38.1
Profit per Employee (INR m) 0.2 0.2 0.3 0.4 0.4 0.4
Investment/Deposit Ratio 26.0 21.7 22.6 23.5 26.3 25.1 24.9 25.3
G-Sec/Investment Ratio 95.7 97.9 98.0 99.2 98.1 98.1 98.1 98.1

Profitability Ratios and Valuation

RoE 9.8 9.7 12.5 7.3 12.2 14.7 15.3 17.2
RoA 1.4 1.4 1.7 1.1 1.9 2.0 1.9 1.9
Book Value (INR) 22 26 30 34 46 52 59 68
Growth (%) 10.3 16.2 14.4 13.8 36.9 11.4 13.4 16.0
Price-BV (x) 4.7 4.1 3.6 3.1 2.3 2.0 1.8 1.6
Adjusted BV (INR) 21 25 28 31 44 50 57 66
Price-ABV (x) 5.0 4.3 3.8 3.4 2.4 2.1 1.9 1.6
EPS (INR) 2.1 2.4 3.5 2.3 4.9 7.2 8.4 10.9
Growth (%) 561.4 13.0 48.1 -33.0 106.8 48.6 16.8 29.3
Price-Earnings (x) 50.6 44.8 30.2 45.1 21.8 14.7 12.6 9.7
E: MOFSL Estimates

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

27 January 2024 9
 Equitas Small Finance

NOTES

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 Equitas Small Finance

Explanation of Investment Rating

Investment Rating Expected return (over 12-month)
BUY >=15%
SELL < - 10%
NEUTRAL < - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall be within following 30 days take
appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in
the business of providing Stock broking services, Depository participant services & distribution of various financial products. MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National
Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for
its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of
Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products. Details of
associate entities of Motilal Oswal Financial Services Limited are available on the website at http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or
derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial
instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and
other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are
completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL
may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage
service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental research and Technical
Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity and therefore it can
have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary
to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures
Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg.
No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to
“Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with
professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian
Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the
United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and
under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOFSL, including the products and
services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act
and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any
investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption
from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission
("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities
International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer,
MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research
analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co. Reg. NO. 201129401Z) which is a holder of a capital markets services license and an
exempt financial adviser in Singapore. As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial
Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this
report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors as defined in
section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must
immediately discontinue any use of this Report and inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company at the end of the month immediately preceding the date of publication of the Research Report or date of the public
appearance.
- received compensation/other benefits from the subject company in the past 12 months
- any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific
recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an
inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or
act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
- Served subject company as its clients during twelve months preceding the date of distribution of the research report.

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 Equitas Small Finance

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts
which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is,
or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any
way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is based on the facts, figures
and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources
believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All
such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or
subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not
treat recipients as customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to
any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an
offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation
that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make
their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment
by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in
this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not
be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not
suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures
of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject
to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its
associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document.
They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as
a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed
therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or
in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction,
where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to
observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees
from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any
of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
This report is meant for the clients of Motilal Oswal only.
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 - 71934200 / 71934263; www.motilaloswal.com.
Correspondence Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 71881000. Details of Compliance Officer: Neeraj Agarwal,
Email Id: na@motilaloswal.com, Contact No.:022-40548085.
Grievance Redressal Cell:
Contact Person Contact No. Email ID
Ms. Hemangi Date 022 40548000 / 022 67490600 query@motilaloswal.com
Ms. Kumud Upadhyay 022 40548082 servicehead@motilaloswal.com
Mr. Ajay Menon 022 40548083 am@motilaloswal.com
Registration details of group entities.: Motilal Oswal Financial Services Ltd. (MOFSL): INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412 . AMFI:
ARN .: 146822. IRDA Corporate Agent – CA0579. Motilal Oswal Financial Services Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Insurance, Bond, NCDs and IPO products.
Customer having any query/feedback/ clarification may write to query@motilaloswal.com. In case of grievances for any of the services rendered by Motilal Oswal Financial Services Limited (MOFSL) write to
grievances@motilaloswal.com, for DP to dpgrievances@motilaloswal.com.

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