Emkay Global
Equitas Holdings (Buy)
Target: ₹65
CMP: ₹59.60
In its Q1-FY21 business update, Equitas Holdings has reported healthy deposit (ex-CD) growth of 11 per cent q-o-q to ₹11,470 crore, led by strong traction in Retail TD (17 per cent q-o-q) in line with the management’s strategy to focus on granular retail deposits.
The moratorium in value terms has fallen from 93 per cent in April-20 to approximately 50 per cent in June 20, the improvement was witnessed across business segments (MFI at 56 per cet from 100 per cent, small business loans (SBL) at 42 per cent from 87 per cent and VF at 65-70 per cent from 90 per cent).
The moratorium as well as business resumption led to reduction in the SMA/overdue pool across products. Collection efficiency has improved in the MFI business to 44 per cent for June EMIs, while the balance remaining in auto-moratorium (56 per cent). Monthly fresh disbursements picked up in June 20 mainly in MFI, VF and SBL.
We retain our Buy rating with a revised TP of Rs 65 (up from ₹54), based on 0.7x FY22 ABV, given better deposit traction after a scare across SFBs in Q4, which should help the bank in the long run to protect its margins/RoA. However, asset quality performance and listing its SFB will remain key monitorable in the near term.
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