Equitas Small Finance Bank transition plan supports growth and RoA recovery
Equitas Small Finance Bank Ltd.
BUY
₹58
₹57.55
₹74
27.59%
Leadership Transition and Business Continuity
Axis Securities' November 13, 2026 company update on Equitas Small Finance Bank Ltd. focuses on the leadership transition following the sudden resignation of former MD and CEO PN Vasudevan. The stock declined around 11 per cent after the announcement amid investor concerns about a perceived conflict of interest linked to his daughter's NBFC.
With regulatory approval, the bank appointed Balaji Nuthalapadi, who had been Executive Director since March 2025, as interim MD and CEO for three months. He had been overseeing technology, digital services and regulatory compliance.
Management stated that operations remain stable, supported by an experienced leadership team, robust operational controls and governance processes. Business heads and collections teams have five to ten years of experience at Equitas Small Finance Bank. Management also said there had been no material change in the business environment or operating momentum following the leadership transition.
Priorities During the Interim Period
- Maintain continuity and business momentum.
- Deliver Q3 and Q4 FY27 in line with earlier guidance.
- Progress towards FY30 milestones.
- Prepare for FY28 expansion through calibrated investment.
- Continue cost optimisation.
Permanent CEO Search and Strategic Continuity
The board is seeking a permanent MD and CEO with banking credentials, strategic vision, execution capability, growth leadership and alignment with the existing strategy. Management expects the selection process to be completed in around four months, subject to timely RBI approval.
The incoming leader is expected to continue the existing five-year plan with only modest changes. Management also downplayed the risk of employee attrition following the former MD and CEO's departure, citing the bank's established franchise, senior-management vintage and employee culture.
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Operating Outlook and Margin Drivers
Management maintained its guidance for a sustained 18 to 20 basis point improvement in NIM over H2 FY27, supported by the deployment of excess liquidity. Funding costs remain under review as deposit rates rise. The bank plans to raise the Maxima fixed-deposit rate by 10 basis points, from 8.0 per cent to 8.1 per cent, to remain competitive.
Lending, deposit growth, CASA and disbursement momentum remain on track, according to management, although macroeconomic conditions could cause deviations. Digitisation of loan origination and servicing is expected to create efficiency gains, but management expects the benefits to take six to nine quarters to fully materialise.
The bank remains compliant with RBI requirements for a universal bank licence application. However, management intends to execute its strategy cautiously before applying.
Broker Estimates
| Financial year | Net interest income (Rs crore) | Profit after tax / net profit (Rs crore) | RoA | Loan growth | Gross NPLs | Net NPLs |
|---|---|---|---|---|---|---|
| FY26 | — | — | — | — | 2.6 per cent | — |
| FY27E | 4,334 | 896 | 1.3 per cent | 23.7 per cent | 2.1 per cent | 0.6 per cent |
| FY28E | 5,193 | 1,096 | 1.3 per cent | 22.1 per cent | — | — |
| FY29E | 6,284 | 1,455 | 1.5 per cent | — | — | — |
Valuation and Investment View
Axis Securities maintains a BUY recommendation with a Rs 74 target price, implying 28 per cent upside from the Rs 58 CMP. The target is based on 1.0x September 2028E adjusted book value, compared with the stock's current valuation of 0.8x September 2028E adjusted book value.
The broker sees returning growth in secured retail segments, gradual normalisation of the MFI portfolio, digital-led cost efficiencies and improving RoA as supportive factors.
Key Monitorables
- Appointment of a permanent MD and CEO.
- Continuity of execution and adherence to the current roadmap.
- Growth priorities under the new leadership.
- Timely delivery of strategic initiatives.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
