Equitas Small Finance Bank Ltd.

Our reasoning

Equitas Small Finance Bank’s outlook remains positive, supported by strong credit growth, increasing portfolio diversification and steady improvement in asset quality. Gross advances grew 30% YoY to ₹50,669 crore in Q2FY27, registering 6.4% QoQ growth over ₹47,641 crore in Q1FY27. Management has raised its FY27 credit growth guidance to over 25%, driven by healthy traction across MSME, Housing, Vehicle Finance and Gold Loans. Asset quality continued to improve, with GNPA declining to 2.29% from 2.42% in Q1FY27 and NNPA moderating to 0.70% from 0.71%, while credit cost declined to 0.94% from 1.37% QoQ. Profitability also strengthened, with PAT increasing to ₹218 crore from ₹184 crore in the previous quarter and RoA reaching 1.31%. Management has upgraded its FY27 RoA guidance to 1.35%, with an exit target of 1.5% by Q4FY27. On the liabilities front, deposits grew 19% YoY and 7% QoQ to ₹52,483 crore, with retail deposits, including CASA, contributing 68% of the overall deposit base. Overall, sustained credit growth, improving asset quality and a gradual recovery in margins provide a favourable earnings outlook. However, the upcoming leadership transition remains a key monitorable. Factoring in the uncertainty and execution risks associated with the new CEO, we assign Equitas a PO of ₹80/share.