Equitas Small Finance Bank: A Strong Investment Opportunity
Shares of Equitas Small Finance Bank (SFB) have been making waves in the market since their listing four years ago. Investors who participated in the initial public offering (IPO) are currently enjoying an impressive profit of 158%. While the stock reached a one-year high in January 2024, it has since declined by approximately 27% from its peak, prompting analysts to view this downturn as a prime buying opportunity.
Current Market Status
As of now, Equitas SFB shares are trading at ₹85.22 on the Bombay Stock Exchange (BSE). Notably, the shares have appreciated by around 5% this month, indicating positive momentum. Analysts at ICICI Securities project that there is potential for a further 17% upward movement from current levels.
Brokerage Insights on Equitas SFB
Strong Business Growth
The domestic brokerage firm Motilal Oswal has commended the robust business growth of Equitas SFB from FY 2022 to FY 2024. During this period, the bank’s loan book grew at a remarkable compound annual growth rate (CAGR) of 26%, while deposits surged at a CAGR of 38%. This strong growth has positively impacted the bank’s credit-deposit ratio, which improved from 86% in FY 2022 to 102% in FY 2024, with retail deposits now making up 69% of the total deposit mix.
Challenges and Future Outlook
Despite facing pressures in the microfinance institution (MFI) segment which have affected profitability, Equitas SFB has effectively reduced its exposure in this area from 19% to 17%. Analysts anticipate that the bank’s asset quality could see improvement in the second half of FY 2025, further strengthening investor confidence.
Growth Projections
Looking ahead, Motilal Oswal forecasts loan growth for Equitas SFB at a CAGR of 23% by FY 2026, with a return on assets (RoA) expected to improve to 1.7%. This optimistic outlook on asset quality, along with projected growth metrics, supports a bullish sentiment for the bank’s shares. Consequently, the brokerage has issued a ‘buy’ rating with a target price set at ₹100.
Historical Performance of Equitas SFB Shares
Equitas SFB made its debut on the stock market on November 2, 2020, initially offering shares at ₹33. Since then, the stock price has soared, providing IPO investors with more than a 158% return. Over the past year, the shares peaked at ₹116.50 on January 12, 2024, before experiencing a downturn that brought the price down to a one-year low of ₹74.60 on August 14, 2024. Since then, the stock has recovered by over 14%, yet it remains about 27% below its one-year high.
Conclusion
The recent drop in Equitas SFB’s share price, combined with its strong growth fundamentals, presents a potentially lucrative opportunity for investors. As analysts continue to back the stock with positive ratings and target prices, those looking to invest in the banking sector should keep an eye on this small finance bank for possible gains in the near future.
Disclaimer: The opinions expressed in this article are solely those of the mentioned brokerage firms and analysts. Users are encouraged to seek advice from certified financial experts before making any investment decisions.
