MOSL: EQUITAS HOLDINGS (Buy)-Risk aversion mars growth-bank transition drags profits lower
​Equitas Holdings: Risk aversion mars growth; bank transition drags profits lower
(EQUITAS IN, Mkt Cap USD0.8b, CMP INR161, TP INR210, 30% Upside, Buy)
- In a quarter marred by uncertainty over the MFI portfolio, Equitas' PAT fell 85% YoY/QoQ to INR69m (~82% miss). Flat AUM QoQ, interest reversal on MFI loans (INR38m) and a decline in high-yielding loans led to net interest income miss of 7% (-4% QoQ, but +30% YoY). NIM contracted 70bp/140bp QoQ/YoY to 9.8%, and high-yielding MFI AUM (~50% of AUM as of 3Q) declined 7% QoQ.
- Continued investments in branches (284 in 4Q v/s 112 in 3Q) led to opex increase of 85% YoY (+17% QoQ) to INR1.95b (in-line). The bank also on-boarded 600+ (+23% QoQ) branch banking employees in 4QFY17.
- GNPA in MFI portfolio, including RBI dispensation (INR620m), stands at INR100m. However, Equitas has proactively classified INR580m worth of accounts as NPA, taking NPA in MFI portfolio to INR680m (2% of MFI AUM). Total at PAR stress on AUM is INR1.9b (INR1.45b on books), with Equitas confident of recovering 50%, leading to total loss of ~INR1b. It already has INR540m of provisions (INR350m specific+INR190m floating) on this portfolio.
- Overall GNPA stood at 3.5%; however, excluding the proactive impaired account recognition, it stood at 2.5%. MFI PAR at >90 DPD was 2.7% v/s 8% for the industry.
Equitas Holdings Limited (EHL) is the holding company. The Company is engages in the businesses through its subsidiaries: Equitas Micro Finance Limited (EMFL), which is engaged in micro finance; Equitas Finance Limited (EFL), which provides used commercial vehicle (UCV) loans, micro and small and enterprise (MSE) finance, and others; Equitas Housing Finance Limited (EHFL), which is engaged in affordable housing loans and micro housing loans, and Equitas Technology Private Limited (ETPL), which offers technology platform for freight, logistics, carriers and related services. The Company's segments include Micro Finance, Other Finance and Others. The Micro Finance segment consists of micro financing. The Other Finance segment consists of housing finance and vehicle finance. The Company also provides loans to subsidiaries and corporate guarantees for the borrowings of subsidiaries from banks and institutions.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.