Equitas Holdings Q3FY18: MFI stress well provided, opex growth stabilizing

Equirus | Feb. 12, 2018, 4:32 p.m.

Equitas Holding (EQUITAS) posted a 3QFY18 loss of Rs 300mn (EE PAT: Rs 200mn) dragged by  elevated  provisions  towards  its  stressed  MFI  exposure,  which  took  the  MFI  NPA provision  coverage  ratio  to  ~96%.  AUM/loan  growth  picked  up  qoq  to  5%/12%  while accretion  to  deposits/CASA  was  healthy  at  19%/38%  qoq.  We  had  been  REDUCE  on EQUITAS given concerns on (i) weak loan/income growth as it looked to run down its MFI book, (ii)  an  increase in  the C/I ratio driven by SFB transition and (iii) possible volatility in NPA trends as sourcing/appraisal process of new asset products stabilize. However, we derive  comfort  from  management’s  guidance  on  the  rundown  in  MFI  loans  being  now complete,  and opex growth stabilizing. We thus upgrade EQUITAS to ADD with a revised Mar’19 TP of Rs 170 (Sep’18 TP of Rs 135 earlier) set at 2.6x/2.3x FY19E/FY20E ABV.

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