MOSL: EQUITAS HOLDINGS (Buy)-Core operating performance improves-lower provisions drive earnings
Equitas Holdings: Core operating performance improves; lower provisions drive earnings
(equitas IN, Mkt Cap USD0.6b, CMP INR120, TP INR150, 25% Upside, Buy)
- PPoP growth in line; Cost-ratios remain elevated: Equitas reported PPoP growth of 198%/14% YoY/QoQ to INR1.2b (largely in line with our estimates), driven by 37%/16% YoY/QoQ growth in NII. Lending spreads improved 49bp QoQ to 11.2%, while NIM stood at 8.98% (+128bp QoQ) on the back of 62bp improvement in cost of funds. Total opex grew 17%/12% YoY/QoQ to INR2.6b (5% above MOSLe) led by 40% YoY growth in other opex (paid PSLC premium of INR238m). Cost-income ratio, thus, remains elevated at 68.2% (39bp QoQ decline).
- Balance sheet de-risking continues: Total AUMs grew 41%/9% YoY/QoQ to INR108.6b, with share of microfinance AUM at 27.2% of total AUM v/s 32% in 3QFY18. However, on an absolute basis, MFI AUM registered 9% QoQ growth (20% YoY) to INR29.5b. Non-MFI AUM registered robust 50%/9% YoY/QoQ growth to INR79.1b, led by 52%/26% YoY growth in business loans and vehicle finance. Vehicle finance loans constituted 25% of the total AUM as at 3QFY19.
- Strong term deposit growth supported overall deposit growth: Total deposits of the bank grew 17% QoQ to INR66.8b, led by 25% sequential growth in term deposits. CASA growth was muted at 2% QoQ, dragging the overall CASA ratio to 30.2% (down 443bp QoQ). Cost of SA was up 8bp QoQ to 6.21%, while overall cost of deposit increased 19bp QoQ to 7.35%.
- Asset quality improved sequentially: GNPLs increased 5.2% QoQ to INR3.4b while NNPAs declined 0.5% QoQ to INR1.8b. Fresh slippages stood at INR0.8b while reductions stood at INR0.6b. In percentage terms, GNPA/NNPA came in at 3.13%/1.75% (-23bp YoY/-23bp QoQ). According to the new recognition policy, GNPAs in the MFI/Vehicle finance/Small business loans/MSE finance stood at 0.74%/6.27%/2.79%/4.29%. Calculated PCR rose to 44% from ~41% in 2QFY19, despite 20% QoQ decline in provisions at INR243m. Credit cost, thus, stood at 0.96% as against 1.36% in 2QFY19.
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.
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