Sharekhan has given Buy recommendation for AU Small Finance Bank with a target price of Rs. 1500 in its research report issued on Mar 10, 2021

Sharekhan’s research report on AU Small Finance Bank

AU Small Finance (AUSFB) has announced its plans to raise equity funds via Qualified Institutional Placement (QIP), which will provide growth capital, help the bank on its way to become a Universal Bank. As per our calculations, Tier-1 ratio will likely increase by ~240 bps, equity dilution to be small (~1.6%), but the book value (Calculated) may increase by ~9.7%. AUSFB is available at 6.1x/4.9x its FY2022E/FY2023E ABPVS; expect bank to report healthy ROA/ROE to improve to 1.9%/18.1% in FY2023E from 1.8%/17.9% in FY2020.

Outlook

We maintain Buy on the stock with a revised price target (PT) of Rs. 1,500.

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