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Business momentum robust; collection efficiency healthy

AUBANK has released its business update for 4QFY22. Here are the key highlights:

AUBANK reported a robust sequential growth of 13.8% (+26.9% YoY) in total AUM to ~INR478b. On a gross advances basis, it witnessed a growth of 14.9% QoQ and 32.4% YoY. The bank saw significant improvement in the overall business environment, which resulted in strong disbursements. In 4QFY22, disbursements were up 26% QoQ to INR102.9b (+38.7% YoY). Disbursements included ECLGS of ~INR0.6b in 4QFY22. The bank is further witnessing strong traction in the Credit Cards business and issued ~0.16m cards as of Mar’22.

On the liability front, total deposits grew by ~46% YoY and 18.8% QoQ to INR526b. This was led by robust Term deposits growth of 23% QoQ (+20% YoY) and CASA deposit growth of ~135% YoY and 12% QoQ. CASA ratio stood at 37% (v/s 39% in 3QFY22 – 36% excluding one government account). The average cost of funds improved by 80bp YoY and 20bp QoQ to 5.7%, with incremental cost of funds stable at 5.3% in 4QFY22.

On the asset quality front, collection efficiency remained strong (105-112%) over 4QFY22. This is likely to aid a sustained improvement in asset quality.

Valuation and view: AUBANK posted a robust growth in advances, led by strong disbursements, due to continuous improvement in its business environment. Deposit growth too remains strong, led by healthy CASA growth, resulting in moderation in the cost of funds. On the asset quality front, collection efficiency remains strong (in excess of 100%). This is likely to result in an improvement in asset quality ratios, providing further comfort. We maintain our Buy rating with a TP of INR1,550/share (4.5x FY24E BV).

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