Revenue
Margin
Demand
Guidance
Tone
Event Participants
Executives
9 Abeshek, Balaji N., Gopalakrishnan G., Jagadesh J., Mukund Shyamrao Barsagade, Murali Vaidyanathan, P N Vasudevan, Sundararaman D., Suresh
Analysts
10 Ashlesh Sonje, Ashwani Kumar Agarwalla, Deepak Poddar, Heet Khimawat, Jeet Suchak, Param Subramanian, Rajiv Mehta, Saumil Shah, Shailesh Kanani, Vivek Ramakrishnan
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Deposits | ₹48,976 crore | +10% YoY, +5% QoQ; CASA at 25%, retail deposits at 65% of base |
| CASA Ratio | 25% | Stable; CASA + RTD at ~66%, reflecting granular retail franchise |
| Cost of Funds | 7.05% | +11 bps QoQ on daily average basis; driven by savings and term deposit rate hikes |
| CD Ratio | ~93% | Comfortable; potential to bring marginally lower as deposit growth picks up |
| LCR | 142% (daily avg) | 176% quarter-end; surplus from quarter-end IBPC/refinance being deployed in Q2 |
| Gross Advances | ₹47,641 crore | +27% YoY; Q1 disbursements at record ₹6,784 crore (+93% YoY) |
| Non-MFI Book | ₹41,623 crore | +22% YoY; secured; used CV +25%, used car +30%, housing +24%, MSE +28% |
| Yield on Advances | 15.74% | +23 bps QoQ; non-MFI yield at 14.89% (+4 bps QoQ) |
| GNPA | 2.36% | -13 bps QoQ; lowest in last two financial years |
| NNPA | 0.70% | +2 bps QoQ; PCR at 71.02% incl. technical write-offs (86.96% overall) |
| Credit Cost | 1.37% | vs 6.48% in Q1 FY26; broadly stable sequentially vs adjusted Q4 FY26 (~1.38%) |
| Net Slippage | 1.43% | Second lowest Q1 in 5 years; MFI slippage down to ₹30 crore from ₹230 crore YoY |
| Net Interest Income | ₹1,030 crore | Total net income ₹1,280 crore (+19% YoY, +3% QoQ) incl. other income of ₹250 crore |
| Profit After Tax | ₹184 crore | vs loss of ₹224 crore in Q1 FY26 |
| NIM | 7.24% | -12 bps QoQ; new daily-average IEA methodology; guided to ~7.1% near-term |
| Cost to Assets / Income | 5.61% / 68.38% | Cost-to-assets -14 bps QoQ to 5.61%; C/I vs 67.52% QoQ, 70.62% YoY |
| ROA / ROE | 1.18% / 11.76% | Q1 ROA near FY27 guidance of 1.2%; 1.5% exit ROA targeted for Q4 |
| CAR | 19.44% | Tier 1 at 16.01%, Tier 2 at 3.43%; no Tier 1 raise expected in CY2026 |
Geographic & Segment Commentary
- Microfinance: Disbursements at ₹1,343 crore, ~11% of loan mix (13% incl. DA); expected collection efficiency at 99.7% and 1-90 DPD improved to 1.10% from 1.34% in Q4 FY26. DA book running down from ₹1,340 crore to ₹838 crore, expected ~₹150 crore by Q4 FY27. 87% of organic MFI book covered under CGFMU; ₹44 crore stress sector provision on over-leveraged exposures (₹88 crore portfolio) may be reversed in 1-3 quarters if normalization holds.
- Small Business Loans: Largest asset class at ₹19,249 crore (+15% YoY); secured business loans within SBL growing faster at +32% YoY.
- Vehicle Finance: +15% YoY overall; used CV +25% YoY and used car +30% YoY, with strategic focus on used vehicles given resilience. Q1 non-MFI slippages partially reflected seasonal vehicle book trends.
- Housing & MSE Finance: Housing finance +24% YoY; MSE finance +28% YoY. ₹500 crore affordable housing DA executed in Q1 as a capital-preservation lever.
- Gold Loans: Book at ~₹1,000 crore; target ₹1,600 crore by FY27 end. Moderate Q1 growth due to branch expansion; ~120 gold-lending branches planned by Q4 to lift disbursements from Q2.
- Liabilities & Deposits: Total deposits at ₹48,976 crore (+10% YoY, +5% QoQ); CASA 25%, CASA+RTD ~66%. Bulk TDs at 30% of book (cooperative banks 18%, government/institutions 12%); 91% of bulk deposits non-callable with one-year duration. FCNR crossed $42 million post-AD1 go-live; ARTHA crossed 1,000 HNI customers; Maxima (3-year-1-day FD) launched. Cost of funds at 7.05%, +11 bps QoQ.
- Treasury: Treasury income at ₹31 crore in a challenging quarter marked by West Asia tensions, INR depreciation pressure, and crude-driven volatility; 10-year benchmark yield closed at 6.77%. RBI's June external-flow measures have attracted $20 billion+.
Company-Specific & Strategic Commentary
- Five-Year Vision: June investor day set out a five-year vision; management reaffirmed commitment, noting Q1 outcomes reflect execution of strategic priorities.
- Digitization & AI: Enterprise LOS and Litigation Management System being built in-house for launch during FY27; initial AI projects underway with benefits expected within 1-2 quarters.
- Capital Optimization: Multiple levers in use—₹500 crore affordable housing DA in Q1, CGTMSE coverage for vehicle finance, CGFMU on 87% of organic MFI, IBPC sell-downs, and mix shift toward lower RWA products (housing, gold). No Tier 1 raise expected in CY2026; enabling resolution for ₹1,250 crore at upcoming AGM with potential raise in Q4 FY27/Q1 FY28.
- Liability Franchise Build-out: Differentiated propositions (ARTHA for HNI, Elite Epic for NRI, Elite Lite for emerging affluent, Maxima FD) driving granular deposit growth; targeting ₹200 crore monthly NTB and 4,000 "House of Elite" accounts.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Advances Growth | 20%+ for FY27 | Reaffirmed; Q1 (+27% YoY) momentum suggests delivery beyond guidance |
| ROA | ~1.2% FY27; 1.5% exit by Q4 FY27 | Q1 at 1.18%; management may revise FY27 guidance upward after Q2 |
| NIM | ~7.1% over next 2-3 quarters | Down from 7.24%; pressure from cost of funds (marginal cost ~8%) |
| Credit Cost | Below 1.37% for FY27 | Steady state with marginal improvement; MFI expected stable |
| MFI Loan Mix | ~10% of advances | From 11% (13% incl. DA); DA book running down to ~₹150 crore by Q4 |
| Gold Loan Book | ₹1,600 crore by FY27 end | From ~₹1,000 crore; branch expansion to 120 by Q4 |
| Capital Raise | No Tier 1 raise in CY2026 | Potential raise Q4 FY27/Q1 FY28; ₹1,250 crore enabling resolution at AGM |
| Headcount | ~500 net additions in FY27 | Largely liabilities front-line (300-400); asset side broadly flat |
Risks & Constraints
| Risk | Context |
|---|---|
| West Asia Geopolitical Spillover | Treasury income at ₹31 crore amid INR depreciation pressure and crude-driven bond volatility (10-yr at 6.77%); imported inflation poses upside risk to RBI's CPI trajectory. Management has not observed portfolio stress yet but remains watchful. |
| Funding Cost Pressure | Cost of funds rose 11 bps QoQ to 7.05% with marginal cost at ~8%; NIM guided down to ~7.1%. Deposit rate competition and 30% institutional bulk mix weigh on margins; management expects bulk mix to normalize to 70/30 or 72/28 over two quarters. |
| MFI Stress Sector Provision | ₹44 crore standard asset provision on over-leveraged MFI borrowers (₹88 crore exposure). Reversal possible in 1-3 quarters only if MFI normalization continues; premature reversal risk if collections deteriorate. |
| Insurance Commission Regulatory Scrutiny | Liability fee income growth muted due to commission structure scrutiny; product mix shifting to term/traditional with suitability guardrails (BWRP). Near-term fee income growth may be capped until health/life penetration ramps in Q2. |
Q&A Highlights
Funding, Mix & Marginal Cost
- Question: Bulk deposit share is rising while individual share falls—what's the medium-term trend, and where does marginal cost of funding sit versus current cost? (Heet Khimawat, IIFL Capital Services)
- Answer: Bulk TDs split between cooperative banks (18%) and government/institutions (12%); FCNR and Maxima traction should restore mix to 70/30 or 72/28 over two quarters. Marginal cost at ~8%, expected to hold around current levels. (Murali Vaidyanathan)
NIM Trajectory
- Question: What drove the NIM decline—yield or cost? (Ashwani Kumar Agarwalla, Edelweiss Mutual Fund)
- Answer: Yield on daily-average IEA rose ~4 bps QoQ; the 11-12 bps increase in cost of funds was the primary drag. NIM expected at ~7.1% over the next 2-3 quarters; quarter-end surplus liquidity (IBPC, refinance) being consumed in Q2. (Gopalakrishnan G. / Mukund Shyamrao Barsagade)
Slippages & MFI Normalization
- Question: Non-MFI slippages inched up—seasonality? DA book run-down timeline? (Heet Khimawat, IIFL Capital Services)
- Answer: Net slippages at ₹151 crore (MFI ₹30 cr, non-MFI ₹120 cr) vs ₹453 crore in Q1 FY26 (MFI ₹230 cr); Q1 seasonality from vehicle book. DA book at ₹838 crore, expected ~₹150 crore by Q4 FY27. (Jagadesh J.)
Capital Preservation & Raise Plans
- Question: With 16% Tier 1, will you lean on DA/securitization, and where will capital land at Q4 FY27? (Vivek Ramakrishnan, DSP Mutual Fund)
- Answer: ₹500 crore affordable housing DA in Q1; CGTMSE coverage for vehicle finance; CGFMU for MFI; IBPC and product mix shift to lower RWA. No Tier 1 raise in CY2026; enabling resolution for ₹1,250 crore; possible raise Q4 FY27/Q1 FY28. (P N Vasudevan)
ROA Guidance & Trajectory
- Question: Is 1.5% exit ROA by Q4 still on track? What about FY28? (Deepak Poddar, Sapphire Capital)
- Answer: Q1 ROA at ~1.2%; full-year should exceed 1.2% guidance; revised guidance likely post-Q2. FY28 full-year ROA should improve on FY27. (P N Vasudevan)
Provision Breakups & Stress Provision
- Question: What are the gross slippage and provision breakups, CD ratio headroom, and reason for headcount decline? (Ashlesh Sonje, Kotak Securities)
- Answer: Gross slippages ₹397 crore (MFI ₹36 cr, non-MFI ₹360 cr); P&L provisions ₹160.66 crore (MFI ₹34.73 cr, non-MFI ₹125.93 cr). CD ratio ~93%, may ease marginally. Headcount down due to no branch additions in Q1; ~500 additions expected for rest of FY27, largely liabilities. (Jagadesh J. / Mukund Shyamrao Barsagade / P N Vasudevan)
- Question: What's left of stress sector provision and how will it be consumed? (Rajiv Mehta, YES Securities)
- Answer: ₹44 crore (vs ₹46 crore in March) on over-leveraged MFI standard assets (portfolio at ₹88 crore); may reverse entirely in 1-3 quarters if MFI stays normal; July collections stable. Write-offs were ~100% provided—MFI ₹143.83 crore, residual ₹24.21 crore vehicle finance. (P N Vasudevan / Mukund Shyamrao Barsagade)
Liability Franchise Acceleration
- Question: Elite book and SA growth are low single digit—how will you pick up through the year? (Param Subramanian, Investec)
- Answer: Elite book at ₹18,475 crore (~40% of book at CRV level); ARTHA crossed 1,000 customers; targeting ₹200 crore monthly NTB from "House of Elite" (2,000 Elite Lite + 1,500 Elite + 500 ARTHA accounts) and double-digit Elite growth by year-end. Refinance funds are marginally cheaper than deposits due to CRR/SLR exemption. (Murali Vaidyanathan / Gopalakrishnan G.)
Gold Loan & Universal Banking
- Question: What explains gold loan moderation and the year-end target? What is the universal banking license timeline? (Shailesh Kanani, Asian Markets Securities)
- Answer: Gold book ~₹1,000 crore, targeting ₹1,600 crore by FY27; branch expansion to 120 branches by Q4 drives Q2+ pickup. Universal banking application under internal review—technically appears in compliance with RBI guidelines; no timeline to file, with dialogue with RBI ongoing. (Jagadesh J. / P N Vasudevan)
Key Takeaway
Equitas Small Finance Bank reported a resilient Q1 FY27 despite elevated funding costs: gross advances grew 27% YoY to ₹47,641 crore on record Q1 disbursements of ₹6,784 crore (+93% YoY), while deposits rose 10% YoY to ₹48,976 crore with CASA at 25%. PAT swung to ₹184 crore from a ₹224 crore loss in Q1 FY26, aided by credit cost normalization to 1.37% and GNPA improvement to 2.36%, the lowest in two years. NIM declined 12 bps QoQ to 7.24% on an 11 bps rise in funding cost to 7.05%, with guidance for ~7.1% near-term. Management reaffirmed 20%+ advances growth and <1.37% credit cost for FY27, with Q1 ROA of 1.18% near the 1.2% full-year guidance and 1.5% exit targeted for Q4; FY27 ROA guidance may be revised upward post-Q2. Strategy centers on MFI normalization (99.7% collection efficiency, DA run-down to ~₹150 crore by Q4), secured non-MFI growth, granular liability build-out (ARTHA, FCNR, Maxima), and capital conservation via CGFMU/CGTMSE, with no Tier 1 raise expected in CY2026. Key watch points include West Asia-driven market volatility, funding cost trajectory, and universal banking license timing.