Shares of Equitas Small Finance Bank, one of the largest small finance banks in India, rose sharply by 7.61% during Monday's intraday trade, reaching a lifetime high of ₹78.4 apiece. This came after the bank reported strong numbers for the March quarter.
The bank has shown a strong performance across all key performance indicators. It has achieved sustainable growth in both loans and deposits, maintained stable margins, and improved its asset quality.
On May 7, the bank posted its highest-ever quarterly net profit of ₹190 crore for Q4FY23, a growth of 59% YoY and 12% QoQ. It had posted a net profit of ₹120 crore in Q4 FY22 and ₹170 crore in the preceding December quarter.
During the January-March quarter, the core net interest income of the lender grew by 25% to ₹1,909 crore. The pre-provisioning operating profit (PPoP) for Q4FY23 soared by 11% YoY to ₹316 crore.
The bank also recorded its highest-ever disbursements during the fourth quarter of FY23 at Rs. 5,917 crore, an increase of 80% YoY. The bank’s flagship product, SBL (small business loans), clocked a YoY disbursement growth of 56%. Advances as of Q4 FY23 were at ₹27,861 crore, up 35% from the same quarter a year ago.
On the key ratio front, the net interest margin remained healthy during the quarter at 9.10%, while the cost-to-income ratio improved to 58.09% as compared to 63.95% in Q3FY23 and 56.85% in Q4FY22. The RoA and RoE stood at 2.28% and 15.52%, respectively.
On the asset quality side, the gross non-performing assets (GNPA) of the bank fell to 2.60% in Q4, a drop of 147 basis points from 3.46% in the third quarter of FY23, while the net NPA ratio improved by 123 basis points YoY to 1.14% in Q4 as compared to 1.73% in Q3FY23 and 2.37% in Q4FY22.
During the quarter, the bank has taken steps to bolster its Provision Coverage Ratio (PCR) by making additional provisions of Rs. 90 crore. As a result, the PCR has improved to 56.90% in Q4 FY23, compared to 50.84% in the previous quarter (Q3FY23) and 42.73% in the same quarter of the previous fiscal year.
Deposit mobilisation also continued its momentum, growing by 34% YoY to ₹25,381 crore, led by robust growth in term deposits at 61% to ₹8,883 crore.
Domestic brokerage firm Nirmal Bang kept its optimistic view on the bank following the solid Q4 scorecard. The brokerage has maintained its 'buy' rating on the stock with a target price of ₹87 apiece.
"In our view, the growth potential for Equitas SFB remains robust. We expect some pressure on NIM as the focus is on low-yielding secured asset," said the brokerage firm.
Equitas Small Finance Bank is engaged in the retail banking business with a focus on microfinance, commercial vehicle finance, home finance, loan against-property finance, corporate finance, and providing financing solutions for individuals and micro- and small enterprises (MSEs).
The stock, which went public on November 02, 2020, is trading 129% higher than its issue price of Rs. 33.0 apiece. During the last three months, the stock has performed exceptionally well, clocking a 40.91% rise.
15 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
