Moving in the Right Direction

Research evidence excerpt

Moving in the Right Direction

3% QoQ) should pick up as festive season approaches. mn)

Other segments saw % QoQ growth similar to / higher than overall. Gold loans BV/shr (Rs)* 1,746 491 550 620

Tang BVPS (Rs) 1,701 485 545 615

grew 13.5% QoQ in 1Q. CV and PV were strong with new vehicles now ~16% of P/E, basic* 16.4 16.6 13.6 11.6

overall vehicle disbursements (ex-2Ws; vs. ~12% of AUM, we estimate). Management P/BV 0.5 2.0 1.8 1.6

P/tang BV 0.5 2.1 1.8 1.6

intends to increase this further to potentially 20-25% of vehicle disbursements as it Return on avg tang eqty 16.9 16.0 14.3 15.0

realizes the benefits of lower incremental borrowing costs in its book borrowing (%)

costs. With improving funding terms and asset quality, and management confident Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare

framework

about MSME improving, AUM growth appears likely to pick up. ** = Based on consensus methodology

* = GAAP or approximated based on GAAP

e = Morgan Stanley Research estimates

However, we conservatively continue to forecast 16% YoY growth in F27 due to geo-

political issues and El-Nino driven monsoon risk. We forecast 18% YoY AUM growth

in both F28 and F29. Management aspires to 18% in F27 as well, mainly picking up in

2H from current 15%+ levels, subject to geo-politics and monsoon.

Management retained its guidance for 8.5% operational NIM; 1Q reported of

9.0% includes free funds benefits, with some more likely in 2Q, we think:

Management expects a stable 8.5% NIM once excess capital is fully utilized, albeit

with a higher share of new vehicle loans. We think that could take a long time to Morgan Stanley does and seeks to do business with

companies covered in Morgan Stanley Research. As a result,

achieve if the loan spread remains constant.