Equitas Small Finance Bank Limited Q3 FY26 Earnings Call Summary

Summary

Equitas Small Finance Bank Limited - Q3 FY26 Earnings Call Summary Friday, January 30, 2026 11:00 AM

Event Participants

Executives 8 Abeshek, Gopalakrishnan G., Jagadesh J., Murali Vaidyanathan, P. N. Vasudevan, Sridharan N., Sundararaman D., Suresh

Analysts 7 Anand Dama, Ashish Agarwal, Ashlesh Sonje, Chetan Gindodia, Deepak Poddar, Jignesh Shial, Parth M., Rahul Kumar, Shreepal Doshi, Vivek Ramakrishnan

Financials & KPIs

Geographic & Segment Commentary

• Microfinance: Portfolio stands at ₹3,800 crores (8.5% of mix, excluding DA); x-bucket collection efficiency improved to 99.4% in December. Management intends to cap this segment at 10% of total advances to minimize volatility while benefiting from high yields.
• Small Business Loans (SBL): The largest segment, growing 14% YoY with monthly disbursements rising to ₹612 crores in Q3. Asset quality in Karnataka has normalized, with net slippages in SBL dropping from 2.49% to 1.46% QoQ.
• Vehicle Finance: Strategic focus remains on used CVs and used cars, which grew 23% and 36% YoY respectively. The segment yields approx. 17%, and asset quality has improved with x-bucket efficiency rising to 98.5%.
• Tamil Nadu / Geography: Exposure to Tamil Nadu has reduced from >50% to 44% over two years, with a long-term target of 36%. The overall South India concentration stands at approximately 60%.

Company-Specific & Strategic Commentary

• Capital Conservation: Increased IBPC outstanding to ₹2,000 crores and covered ₹1,690 crores of vehicle finance under CGTMSE to release capital (80% principal relief) without diluting equity.
• Liability Strategy: Rationalized SA rates to 5.1% and TD rates to 7.3%; focused on migrating 110,000 customers from 444-day to 888-day deposits to lock in lower costs and longer duration.
• New Product Launches: Launched FCNR (USD/GBP) for NR customers and “Elite Lite” for mass affluent; “ARTHA” HNI program and seafarer-specific products are scaling to improve fee income.
• Universal Banking: Management aims to meet all RBI eligibility criteria by March 2026 and will review the application process based on those financials.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Asset Quality & Credit Costs

• Question: What is the trajectory for credit costs given the improvement in slippages? (Chetan Gindodia)
• Answer: Net slippages are at a 6-quarter low. Credit cost dropped to 1.88% in Q3 and is expected to be below 1.5% in Q4 (Jagadesh J.).

Margins & Repricing

• Question: How much of the TD book has been repriced, and what is the NIM outlook? (Parth M.)
• Answer: 60% of the TD book is repriced; 85% will be done by Q4 exit. NIM saw a 43-bps jump this quarter and is expected to have an upward bias as COF continues to drop (Murali Vaidyanathan / P.N. Vasudevan).

Microfinance Strategy

• Question: Will you increase the MFI cap beyond 10% given the current momentum? (Shreepal Doshi)
• Answer: No. We will maintain the 10% cap to avoid disproportionate volatility during cycles. We want a more stable, steady bank (P.N. Vasudevan).

Capital Raising

• Question: What are the timelines for the next capital raise? (Vivek Ramakrishnan)
• Answer: With 20.47% CRAR and active capital conservation via CGTMSE and IBPC, we don’t need capital in H1 FY27. We will review in H2 FY27 to postpone dilution as long as possible (P.N. Vasudevan).

Key Takeaway

Equitas SFB delivered a recovery quarter in Q3 FY26, characterized by a significant NIM expansion to 6.72% and a six-quarter low in net slippages. Financial performance was highlighted by a 16% YoY growth in gross advances and a PAT of ₹90 crores, which included a ₹29.5 crore onetime labour code impact. Strategically, the bank is pivoting toward capital-light growth, utilizing CGTMSE guarantees for 80% capital relief on vehicle loans and capping the high-volatility MFI segment at 10% of the total mix. Management successfully rationalized deposit costs, with 60% of term deposits already repriced at lower rates. Looking ahead, the bank guided for a 1.0% exit ROA in Q4 FY26 and targets 20-25% loan growth for FY27. The primary watch point remains the successful execution of the Universal Banking license application in early FY27 amidst a competitive deposit environment.