Motilal Oswal Places Buy Call On This Small Cap Stock, Reported Healthy Growth, Grew 20.1% YoY

Motilal Oswal has placed a "buy" call on the stock of Equitas Holdings Limited without any target price. EQUITAS is a small-cap financial sector company having a market cap of Rs 3,434.99 crore. Equitas reported healthy growth in gross advances, which grew 20.1% YoY. Recently the company released its business update for 2QFY23.

It is a Non-Deposit Taking Systemically Important - Core Investment Company - registered with The Reserve Bank of India (RBI). The activity of the company is to make investments in subsidiary companies and provide loans to them. It has no other operations. The company has two Wholly Owned Subsidiaries namely Equitas Small Finance Bank Limited and Equitas Technologies Private Limited.

Stock Outlook & Returns

On Friday, October 07, the stock closed at Rs 100.50/share on NSE. Its 52-week low is Rs 75 and its 52-week high is Rs 145, respectively. The stock has given mixed returns over the past 5 years. 

 It has given a positive return of 1.36% in the past 1 week, whereas, in the past 1 month, it gave 3.18% negative return. In the past 3 months, it gave 10.74% positive return and 17.68% negative return over a year. In the past 5 years, it gave 34.85% negative return on the investments. 

key highlights of business update for 2QFY23

• EQUITAS reported a healthy growth in gross advances, which grew 20.1% YoY and 5.1% QoQ to INR228b. Growth was supported by strong disbursements, which grew 18.7% QoQ and 22.3% YoY to INR38.5b.
• On the liability front, deposit traction remains strong (up 20.1% YoY and 6.6% QoQ) ~INR217b, within which CASA deposits grew 27.5% YoY, but declined 1% QoQ. CASA ratio moderated to 48.1% (down 361bp QoQ).
• Within CASA, saving deposits grew 27% YoY (but fell 1% QoQ) to INR98b, while current deposits rose 31% YoY (but fell 4% QoQ).
• Retail Term deposits grew 8% QoQ and 13% YoY to ~INR77b. Bulk Term deposits rose 31% QoQ and 15% YoY to INR36b.
• Cost of funds increased by 5bp QoQ to 6.25%.

Valuation and view

According to the brokerage, EQUITAS reported a healthy loan growth as its customer businesses are generating healthy cash flows, which aided disbursements. Deposit growth was supported by Term Deposits, even as CASA remained under pressure. As a result, the cost of funds saw an increase. Performance on asset quality and progress on its merger with Equitas Small Finance Bank will be closely monitored.

 

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.