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Investment Case
April 2019
Equitas Holdings Limited
Company Background
Equitas Holdings Limited is a diversified financial services provider focused on low income groups and economically
weaker individuals operating small businesses, as well as MSEs with limited access to formal financing channels on account
of their informal, variable and cash-based income profile.
The Company has well diversified product portfolio with low ticket size and high yields.
Equitas Product
Portfolio
ATS: INR 4-6 Lacs ATS: INR 3-7 Lacs ATS: INR 34 Lacs ATS: INR 18.6 Cr.
Yields: 18-21% Yields: 18-20% Yields: 17-18% Yields: 11%
As on Q2FY19, Equitas has a total AUM of INR 9,981 Cr., spread across categories such as Micro-finance, Vehicles, Micro
LAP/Small business, Housing, Agri, Gold, MSE and corporate. The retail liability front is shaping up well, with deposits
forming 52% of total borrowings and CASA forming 35% of the deposit base.
The Company has an asset network of 500 branches and a liabilities network of 375 branches.
Source: Company website and press releases 2
Evolution of Equitas
Fast Paced Diversification Towards High-Yield Secured Products
Stage IV:
FY18-FY20E
Stage III:
FY16-18
Stage II:
FY11-16
Mr. Bhaskar S, joined Equitas in Oct, 2007 and served as the CFO prior to his
appointment as the Executive Director & CEO in Oct, 2016. He is a Chartered
Accountant. He started his career with Pricewaterhouse & Co., where he worked
Executive Director &
S. Bhaskar Oct 2007 for one and a half years and later moved to Cholamandalam Investment and
CEO
Finance Company Limited where he worked for two decades. Prior to joining
Equitas Group, he was the Group Treasurer and Senior Vice President – Audit for
the Murugappa Group, Chennai.
Prior to joining Equitas he was with SRA Systems Ltd as General Manager -
Chief Financial Officer
Sridharan N. Aug 2010 Finance for nine years and prior to that, he was associated with Subhiksha
– SFB
Trading Services as Vice President – MIS and Commercial Control.
Srimathy Prior to joining Equitas Group, she had 6 years professional experience working
Chief Financial Officer Oct 2013
Raghunathan with Tata Capital Limited and Hinduja Leyland Finance Limited.
President (Incl. Vast experience of 25 years in Micro finance, lending and FMCG. He has worked
HKN Raghavan Dec 2008
Banking) with various FMCG majors like Hindustan Unilever Ltd, Dabur Ltd etc.
President (SME 25 years’ experience of in retail, SME financing. He has earlier worked with Axis
Bhadresh Phatak NA
Banking) Bank, IDBI Bank and Yes Bank.
Head – Emerging He has a vast experience in Vehicle financing from his previous association with
Ajit Balkrishnan NA
Enterprise Banking Cholamandalam, GMAC and Apple Credit.
• Valuation Ratios
− P/E
− P / BV
− P / Adj. BV
5
Financial Overview
Source: Annual Report
Income Statement Balance Sheet
(INR Cr.) FY17 FY18 FY19E FY20E FY21E (INR Cr.) FY17 FY18 FY19E FY20E FY21E
Interest earned 1,443 1,598 2,103 2,740 3,563 Equity share
338 340 340 340 340
capital
Int. expended 576 674 955 1,255 1,705
Reserves &
NII 867 924 1,148 1,484 1,858 1,893 1,936 2,143 2,481 2,982
surplus
Non-interest inc. 114 189 263 330 439 Net worth 2,231 2,276 2,483 2,821 3,323
Total income 981 1,114 1,411 1,814 2,297 Deposits 1,572 4,719 7,770 11,670 16,370
Growth 44% 14% 27% 29% 27% Growth - 200% 65% 50% 40%
Opex Costs 615 891 966 1,105 1,265 Borrowings 4,971 5,888 5,283 6,333 7,715
Growth 71% 45% 8% 14% 15% Other liabilities &
670 612 572 592 612
Staff Costs 396 520 551 634 729 provisions
Other Opex 219 371 451 471 536 Total liabilities 7,213 11,219 13,625 18,595 24,697
Equitas has successfully reduced the microfinance mix in its loan book from 54% in FY16 to 27% today.
Prior to turning into a bank, Equitas grew its AUM at 60% CAGR over FY13-16, way ahead of industry growth.
× Equitas’s transition to a SFB resulted in lower AUM growth and higher opex growth during FY17-18, translating to lower return ratios.
Market expects Equitas’ ROAs/ROEs to improve to 1.4-1.8% / 9-15% respectively, over FY19-21E from a slump in FY18, led by margin
stabilization, fees improvement and opex/credit costs moderation.
+ An investment in this company can be contemplated as the current market price of INR 135 is lower than the estimated
target price band of INR 150-190.
Source: Emkay, Investec and Nirmal Bang Research 8