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Advances growth healthy; traction in deposits stays strong

EQUITAS released its business update for 1QFY23. Here are the key highlights:

* EQUITAS reported a healthy growth in gross advances, which grew 21.7% YoY and 5.4% QoQ to INR217b. Growth was supported by strong disbursements, which stood stable QoQ at INR32.4b (up 156% YoY).

* On the liability front, traction in deposits remains strong, up 19.3% YoY and 7.6% QoQ to ~INR204b, within which CASA deposits grew 55.3% YoY and 7% QoQ. The CASA ratio stood broadly stable at 51.7%% (-26bp QoQ).

* Within CASA, saving deposits grew 54% YoY and 9% QoQ to INR98.6b, and current deposits grew 71% YoY (down 11% QoQ).

* Retail Term deposits were flat QoQ, up 14% YoY to ~INR71b. Bulk Term deposits rose 38% QoQ, but fell 32% YoY to INR27.6b.

* View: EQUITAS reported a healthy loan growth as its clients’ businesses is generating healthy cash flows, which supported disbursements. Deposit growth was supported by sustained traction in CASA deposits. As a result, the cost of funds stood stable QoQ at 6.2%. The performance on the asset quality front and merger progress will be closely monitored. We maintain our Buy rating with a TP of INR130 per share (premised on 0.9x FY24E ABV).

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