Equitas Small Finance Bank has been upgraded to 'Add' from 'Reduce' with a revised target price of ₹77, up from the earlier target of ₹65. According to reports from The Hindu BusinessLine, the upgrade follows the bank's analyst day where management outlined its next phase of evolution after years of portfolio diversification and technological investments. The current market price stands at ₹75.53, indicating the stock trades below its new target price.
The most significant development highlighted at the analyst day was the bank's successful transformation of its loan portfolio. As reported by The Hindu BusinessLine, MFI exposure has reduced dramatically from over 50% at the time of bank conversion in FY17 to approximately 10% currently, while the secured portfolio has increased to around 88%. This shift represents a fundamental change in the bank's risk profile, with growth now increasingly driven by secured lending segments including small business loans, affordable housing, vehicle finance, and gold loans.
Management expects continued gains from multiple revenue streams including current accounts, affluent banking, NRI banking, and cross-sell initiatives. According to the analyst day commentary, technological investments and AI-led processes are expected to support operating leverage improvements. However, as noted by The Hindu BusinessLine, deposit mobilisation remains the most critical execution variable for sustaining the bank's 20% loan growth target and achieving management's profitability aspirations.
The broker has increased FY27E/28E EPS estimates by 4% and 5% respectively, reflecting confidence in the bank's transformation strategy. As reported by The Hindu BusinessLine, the target FY28E P/BV has been revised upward to 1.2x from 1x, supporting the higher target price. The upgrade to 'Add' rating reflects improved confidence in the bank's ability to execute its diversification strategy and achieve its profitability targets through enhanced liability franchise and operational efficiency.
