Company Update

Institutional Research
India I BFSI
19 March, 2024

AU Small Finance Bank ADD

Price: Rs560
Near term pain to continue Target Price: Rs809
Forecast return: 44%

We participated in AU-Fincare Bank's analyst meet, aimed at discussing its vision for FY24- Market Data
27 and growth trajectory. The meeting outlined three main objectives: 1) Management Bloomberg: AUBANK IN
emphasized that the credit cost increase during 3QFY24 should be viewed as an anomaly. 52 week H/L: 813/548
They assured that AU would revert to reporting credit costs within its historical range within Market cap: Rs374.8bn
a quarter, as newer products mature; 2) The bank is actively shifting its AUM mix towards Shares Outstanding: 669.1mn
higher-yielding products such as microfinance, credit cards, and small business loans. This Free float: 65.4%
strategic move is expected to boost yields and prevent further compression of NIM; and 3)
Avg. daily vol. 3mth: 33,77,675
The Bank aims to achieve a RoA of 1.8% by FY27, up from the current 1.5%. This will be Source: Bloomberg
driven by: a) Expansion of NIMs through increased yields and anticipated rate cuts in the
second half; b) Calibrated investments in new products and branches would lead to Changes in the report
operational efficiencies; and c) Anticipated reduction in credit costs in the future. However Rating: Unchanged
given the near-term challenges, we maintain an ADD rating on the stock with a revised TP Target price: Unchanged
of Rs. 809 (Rs764). EPS: (7.1%) FY20E, (8.3%) FY21E
Source: Centrum Broking
Expect deposit and credit growth of ~20-25% over FY24-27
According to the management, the bank is poised to achieve substantial growth of 20-25% in AUBANK relative to Nifty Midcap 100
both deposits and credit over the next three years. To bolster its deposit base, the bank 170 Nifty Midcap 100
intends to leverage the urban liability branches of Fincare, utilizing its effective liability 155
products to ensure cost-efficient deposit expansion. Additionally, the growth in credit will be 140
primarily driven by higher-yielding products such as microfinance, credit cards, small business 125

loans, and affordable housing loans. It's noteworthy that, on a consolidated basis, the 110
95
microfinance and unsecured loan portfolios will be limited to 10% and 20% respectively, AUBANK
80
ensuring a balanced and sustainable approach to growth. Mar-23 May-23 Jul-23 Sep-23 Nov-23 Jan-24 Mar-24
Management's assurance in achieving historical return profile Source: Bloomberg
In the past, AU Bank has consistently achieved an average RoA of 1.7% over the period FY18-
Shareholding pattern
23, along with an impressive 31% CAGR in AUM, even amidst challenging macroeconomic
Dec-23 Sep-23 Jun-23 Mar-23
conditions that have tripped up its peers. Consequently, the stock enjoys a premium
Promoter 25.5 25.5 25.5 25.5
valuation. Moreover, the management has expressed confidence in sustaining their growth
trajectory of approximately 25% over FY24-27 and achieving a return profile of around 1.8% FIIs 41.1 41.6 41.6 39.7
by FY27. This confidence is underpinned by synergies from the addition of higher-margin DIIs 20.8 19.6 19.3 20.6
products and cross-selling opportunities, as well as expected operational efficiencies, and Public/other 12.6 13.3 13.6 14.1
calibrated strategic investments. Source: BSE

Valuations and Outlook

The acquisition presents both a strategic opportunity and operational challenge for AU.
Rigorous risk management, cultural alignment, and efficient execution will be pivotal to
realizing the full potential of this deal. We believe that though the complimentary nature of
businesses of AU and Fincare is clearly evident the key thing to look out for would be
“execution”. AU, stock performance has been subdued since the announcement of merger
(down 17% over last five months) and also over the past three years (down by 6.7%).
Moreover, we believe that the stock would remain under pressure in near term as acquisition
related one-time costs and near term higher credit cost will put pressure on the financial
performance. However, given attractive valuations (2.3ABV FY26E Vs 5year avg. of 4.1x
ABV) we would closely monitor business developments from long term perspective.
Financial and valuation summary (merged)
YE Mar (Rs mn) FY22A FY23A FY24E FY25E FY26E
NII 41,129 55,157 68,552 83,890 1,10,801
PPoP 22,432 24,626 32,621 37,459 53,567
Provisions 7,834 4,680 7,315 11,462 15,626
Net profit 11,387 15,315 18,939 18,826 28,394
Loan growth (%) 33.1 26.3 25.6 24.0 23.9
NIM (%) 6.1 6.3 6.4 6.4 6.8
BFSI

Cost/income (%) 57.7 63.7 63.2 65.7 61.8

GNPA (%) 2.7 1.8 2.0 2.3 2.6
RoA (%) 1.6 1.7 1.7 1.5 1.6
RoE (%) 14.2 14.6 14.0 13.5 15.5 Shailesh Kanani
P/ABV (x) 3.7 4.2 2.9 2.6 2.3 Research Analyst, BFSI
Source: Bloomberg, Centrum Broking
+91-022-42159001
shaliesh.kanani@centrum.co.in

Please see Disclaimer for analyst certifications and all other important disclosures.
AU Small Finance Bank 19 March, 2024

Thesis Snapshot
AU Small Finance Bank versus NIFTY Midcap 100 Valuations
1m 6m 1 year AUBANK has enjoyed premium multiples due to consistent loan growth,
AUBANK IN (6.5) (23.2) (5.1) pristine asset quality and attractive return ratios. However, this strategic
shift could potentially expose the bank to macroeconomic challenges, which,
NIFTY Midcap 100 (6.7) 13.3 54.2
up until this point, AUBANK has managed to weather more effectively than
Source: Bloomberg, NSE
its peers in the SFB sector. Hence, we maintain an ADD rating on the stock
with a revised TP of Rs. 809 (Rs764).
Key assumptions Valuations Rs/share
Y/E Mar FY24E FY25E FY26E 1HFY26E ABV (Rs) 231
AUM Growth 39.3 25.0 24.0 Ascribed P/BV (x) 3.5
NII growth 24.3 22.4 32.1 Target Price (Rs) 809
Other Inc./Assets 1.8 1.8 1.7 Upside to CMP 44%
Opex/Assets 4.9 5.1 5.0
Provision Cost 0.9 1.2 1.3 P/ABV mean and standard deviation
Source: Centrum Broking 7.0

5.0

3.0

1.0 Sep-19

Sep-20

Sep-21

Sep-22

Sep-23
Mar-19

Mar-20

Mar-21

Mar-22

Mar-23

Mar-24
P/ABV Mean
Mean + Std Dev Mean - Std Dev
Mean + 2Std Dev Mean - 2Std Dev
Source: Bloomberg, Centrum Broking

Peer comparison
EPS (Rs) ABVPS (Rs) RoAA (%) RoAE (%)
Company
FY23A FY24E FY25E FY26E FY23A FY24E FY25E FY26E FY23A FY24E FY25E FY26E FY23A FY24E FY25E FY26E
EQSFB 5.2 7.2 9.2 12.5 43.6 48.9 56.2 66.5 1.9 2.0 2.0 2.1 12.2 14.5 16.2 18.8
UJJIVANS 5.6 6.5 6.7 8.6 21.5 27.0 32.0 39.2 3.9 3.4 2.9 2.8 31.4 26.5 22.3 23.0
SURYODAY 7.3 19.6 26.0 29.8 140.5 160.1 187.2 216.6 0.9 1.9 2.0 1.9 5.0 12.3 14.2 14.1
Average 6.0 11.1 14.0 17.0 68.5 78.7 91.8 107.4 2.2 2.4 2.3 2.3 16.2 17.8 17.6 18.6
AUBANK 21.4 23.5 28.8 38.1 159.7 179.2 201.4 232.7 1.8 1.6 1.5 1.6 15.9 13.4 14.4 16.3

CAGR (FY23-26E) P/E (x) P/BV (x)

Company CMP (Rs) Rating TP (Rs) Mcap (Rsmn)
AUM NII Opex PPoP FY23A FY24E FY25E FY26E FY23A FY24E FY25E FY26E
EQSFB 92 Buy 123 104,883. 27.1 25.1 20.0 28.2 17.7 12.8 10.0 7.4 2.0 1.8 1.5 1.3
UJJIVANS 45 Buy 64 88,987 30.7 24.9 25.8 23.1 8.1 6.9 6.7 5.2 2.1 1.6 1.4 1.1
SURYODAY 161 Buy 252 17,050 28.6 26.0 28.7 26.2 22.3 8.2 6.2 5.4 1.1 0.9 0.8 0.7
Average 28.8 25.3 24.8 25.8 16.0 9.3 7.6 6.0 1.7 1.4 1.2 1.0
AUBANK 560 Add 809 373,916 25.6 27.1 26.1 29.6 31.1 21.9 22.1 14.6 4.0 2.8 2.5 2.1
Source: Company, Centrum Broking

Centrum Institutional Research 2

AU Small Finance Bank 19 March, 2024

Exhibit 1: Calibrating Investments based on learnings

 Moderating card issuance growth to reduce upfront impact of acquisition cost

Credit Cards Moderate  Optimizing sourcing channels and increased collaboration with branch banking

 Focus on collections to control credit costs

QR Code/ merchant Moderate + Align  w.e.f. April’23, sourcing strategy aligned with Branch banking and deployment of QR code is
for Current account deepening

 To act as a channel for liabilities and customer acquisition

Video Banking Make it profitable
 Small drag on the P&L; Taking corrective actions to make it profitable

 BAU expenses for digital penetration and customer acquisition

Digital Initiatives BAU
 Helps the Bank to create awareness about our brand

 Natural ask from customers and strategic hook for our liabilities business

Personal Loans and Business Loans Profitable  Developing platform to acquire NTB customers and cross-sell

 RoA accretive but operating leverage yet to kick in

 Some WIP capex is scheduled for FY25

AD-I business Build
 Variable business linked cost to have impact on Opex but expected to breakeven in Year 1
Source: Company data

Exhibit 2: Product snapshot

Wheels MBL HL
AUM (Mn) 2,70,040 2,08,580 54,530
Average Tenure (Month) 42 108 210
ATS (Mn) 0.3 1.1 1.2
730 CIBIL Score (% of portfolio) 50% 43% 55%
730 CIBIL Score (NTC ) 11% 18% 22%
<10 Lakh ticket Customers 95% 25% -
Portfolio Yield 13.9% 14.9% 11.6%
Unique Customers (Mn) 8.4 1.9 0.4
NTB 72% 72% 70%
ETB 28% 28% 30%
Average EMI Amount (Rs) 12,000 -13,000 17,625 12,212
Gross NPA% 2.05% 2.96% 0.55%
Avg. LTV 46%
Salaried 39%
Customer Mix
SENP – 61%
Source: Company data

Centrum Institutional Research 3

AU Small Finance Bank 19 March, 2024

Charts: Product overview

Exhibit 3: Wheels AUM growth trend overview Exhibit 4: AUBANK-Wheels Current % trend
AUM (Mn) CURRENT%

270040

84.62%
2,54,540

84.40%
84.34%

84.17%
2,43,840

83.25%
300000

2,28,330

81.91%
86%

2,14,770
275000

80.48%
2,00,950
84%

79.47%
1,86,140

250000
1,73,000

225000 82%
200000 80%
175000 78%
150000 76%
Nov-22

Nov-23

Nov-22

Nov-23
Jul-22

Jul-23

Jul-22

Jul-23
Sep-22

Sep-23

Sep-22

Sep-23
Mar-22

May-22

Jan-23

Mar-23

May-23

Mar-22

May-22

Jan-23

Mar-23

May-23
Source: Centrum Broking, Company Data Source: Centrum Broking, Company Data

Exhibit 5: Stability in SMA-Wheels Exhibit 6: Wheels continuously reducing NPA...

SMA% NPA%
17.85%

2.68%

2.56%
16.96%

2.30%
20%

2.14%

2.10%
3%

2.05%
2.01%
15.65%

1.96%
14.61%

18% 3%
13.78%
13.65%

13.50%
13.48%

16% 2%
2%
14%
1%
12% 1%
10% 0%

Nov-23
Nov-22

Nov-23

Nov-22
Jul-22

Jul-23

Jul-22

Jul-23
Sep-22

Sep-23

Sep-22

Sep-23
Mar-22

May-22

Jan-23

Mar-23

May-23

Mar-22

May-22

Jan-23

Mar-23

May-23
Source: Centrum Broking, Company Data Source: Centrum Broking, Company Data

Exhibit 7: Declining vintage-wise NPA trends-Wheels

0 - 12 Months 13 - 24 Months 25 - 36 Months
9% 8.15% 8.06%
8%
7%
5.87%
6% 5.16%
4.90%
5% 4.06% 4.03%
4%
3% 2.52%
1.80% 2.04% 1.80%
2% 1.33%
0.69%
1% 0.36% 0.33% 0.25% 0.18% 0.20%
0%
Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23

Source: Centrum Broking, Company Data

Centrum Institutional Research 4

AU Small Finance Bank 19 March, 2024

Exhibit 8: MBL AUM continuously show positive trend Exhibit 9: MBL's current % trends lower than others
AUM (Mn) CURRENT%

2,08,580

78.84%
2,03,420
240000

1,99,230

78.30%
1,95,100

78.00%
77.93%
80%

1,82,150
220000

76.82%
1,74,670
79%
1,69,120
1,65,240

200000 78%

75.55%
75.09%
74.99%
180000 77%
76%
160000
75%
140000 74%

Jun-23
Jun-22

Dec-22

Dec-23

Jun-22

Dec-22

Jun-23

Dec-23
Sep-23
Sep-22

Sep-23

Sep-22
Mar-22

Mar-23

Mar-22

Mar-23
Source: Centrum Broking, Company Data Source: Centrum Broking, Company Data

Exhibit 10: Declining SMA trends in MBL financing Exhibit 11: MBL's rising NPA trend
SMA% NPA%

2.96%
22.31%

22.11%

2.86%
21.66%

2.79%

2.79%
3%

2.78%
23%

2.71%

2.70%
3%
20.40%

22% 3%

2.50%
3%
19.21%

21%
19.04%
19.00%

3%
18.66%

20% 3%
2%
19%
2%
18% 2%
Jun-22

Dec-22

Jun-23

Dec-23

Jun-22

Dec-22

Jun-23

Dec-23
Sep-22

Sep-23

Sep-22

Sep-23
Mar-22

Mar-23

Mar-22

Mar-23
Source: Centrum Broking, Company Data Source: Centrum Broking, Company Data

Exhibit 12: Vintage-wise NPA Trend - MBLs

0 - 12 Months 13 - 24 Months 25 - 36 Months
12% 10.78%

10%

8%

6%
4.33%
3.68%
4% 3.27% 3.09%
2.24%
1.31% 1.50% 1.56% 1.22%
2% 1.09%
0.16% 0.08% 0.44%
0.08% 0.24% 0.07% 0.16%
0%
Dec-18

Dec-19

Dec-20

Dec-21

Dec-22

Dec-23

Source: Centrum Broking, Company Data

Centrum Institutional Research 5

AU Small Finance Bank 19 March, 2024

Exhibit 13: HL growth outpaces others… Exhibit 14: Decline in HL-Current % from recent period.
AUM(Mn) CURRENT%
60000 54,530
50,660 96% 95.56% 95.60%
46,950
50000 42,810 96%
36,930 94.94% 94.95% 94.82%
40000 33,650
30,040 95% 94.53%
26,540 94.32%
30000 95%
93.89%
20000 94%
10000 94%
0 93%
Jun-22

Dec-22

Jun-23

Dec-23

Jun-22

Dec-22

Jun-23

Dec-23
Sep-22
Sep-22

Sep-23

Sep-23
Mar-22

Mar-23

Mar-22

Mar-23
Source: Centrum Broking, Company Data Source: Centrum Broking, Company Data

Exhibit 15: HL-SMA display high rate than others Exhibit 16: HL-NPAs in an upward trend..
SMA% NPA%
6% 5.56% 0.6% 0.55%
6% 5.24% 0.6%
5.02%
0.48%
5% 4.64% 4.61% 4.69% 0.5%
0.44% 0.45% 0.44% 0.44%
5% 4.08% 0.5% 0.42%
4.00%
4% 0.4%
0.33%
4% 0.4%
3% 0.3%
Jun-22

Dec-22

Jun-23

Dec-23

Jun-22

Dec-22

Jun-23

Dec-23
Sep-22

Sep-23

Sep-22

Sep-23
Mar-22

Mar-23

Mar-22

Mar-23
Source: Centrum Broking, Company Data Source: Centrum Broking, Company Data

Exhibit 17: Vintage-wise NPA Trend - HL

0 - 12 Months 13 - 24 Months 25 - 36 Months
4% 3.09%
3% 2.80%

3%

2%

2%
1.01% 1.02%
0.86%
1% 0.69%
0.33% 0.35%
1%
0.06% 0.05%
0.00% 0.02%
0%
Dec-20

Dec-21

Dec-22

Dec-23

Source: Centrum Broking, Company Data

Centrum Institutional Research 6

AU Small Finance Bank 19 March, 2024

Exhibit 18: ROA tree AUBANK after acquisition

FY24E FY25E FY26E
FY20 FY21 FY22 FY23 AU Merged AU Merged AU Merged
Total Assets 4,21,431 5,15,913 6,90,778 9,02,161 10,83,679 12,41,418 13,53,733 15,44,250 16,70,966 19,18,526
Average total assets 3,73,829 4,68,672 6,03,345 7,96,470 9,92,920 11,34,128 12,18,706 13,92,834 15,12,350 17,31,388
Equity 43,768 62,752 75,140 1,09,773 1,24,427 1,48,178 1,41,416 1,68,838 1,63,687 1,96,565
Average Equity 37,699 53,260 68,946 92,457 1,17,100 1,35,544 1,32,921 1,58,508 1,52,551 1,82,701
Interest Income on term loans/ Average total assets 9.1% 8.4% 8.1% 8.6% 8.5% 9.5% 8.6% 9.6% 8.8% 9.8%
Income on investments/money with RBI/other
1.7% 1.8% 1.4% 1.6% 1.8% 1.6% 1.7% 1.6% 1.8% 1.6%
banks / Average total assets
Non-Interest Income/ Average total assets 1.9% 3.0% 1.6% 1.3% 1.7% 1.8% 1.7% 1.8% 1.6% 1.7%
Total Income/ Average total assets 12.7% 13.3% 11.2% 11.5% 11.9% 12.9% 12.1% 13.1% 12.1% 13.1%
Interest on Deposits, borrowings and debt securities
6.4% 5.5% 4.5% 4.7% 5.4% 5.0% 5.4% 5.1% 5.2% 4.9%
/ Average total assets
Net Interest Income / Average total assets 5.1% 5.0% 5.4% 5.6% 4.9% 6.0% 5.3% 6.0% 5.7% 6.4%
Net Total Income/ Average total assets 7.0% 8.1% 7.0% 6.9% 6.6% 7.8% 7.0% 7.8% 7.2% 8.1%
Operating Expenses / Average total assets 3.8% 3.5% 4.0% 4.3% 4.4% 4.9% 4.4% 5.1% 4.5% 5.0%
PPOP/Average total assets 3.2% 4.6% 3.0% 2.5% 2.6% 2.9% 2.6% 2.9% 2.8% 3.1%
Provision Cost / Average total assets 0.8% 1.4% 0.6% 0.19% 0.49% 0.6% 0.66% 0.8% 0.72% 0.9%
Profit before tax / Average total assets 2.4% 3.1% 2.4% 2.3% 2.1% 2.2% 1.9% 2.0% 2.0% 2.2%
Tax expense/ Average total assets 0.3% 0.6% 0.5% 0.5% 0.5% 0.6% 0.5% 0.5% 0.5% 0.6%
One-time adjustment/Average Total Assets 0.2% 1.2% 0.0% -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
RoAA 1.9% 1.3% 1.9% 1.8% 1.5% 1.7% 1.4% 1.5% 1.5% 1.6%
Leverage (Average total assets/average Equity or
9.9 8.8 8.7 8.6 8.5 8.4 9.2 8.8 9.9 9.5
average Net-worth)
RoAE 19.1% 11.6% 16.4% 15.9% 13.1% 14.0% 13.3% 13.5% 15.0% 15.5%
Source: Centrum Broking, Company Data

Centrum Institutional Research 7

AU Small Finance Bank 19 March, 2024

P&L* Balance sheet*

YE Mar (Rs mn) FY22A FY23A FY24E FY25E FY26E YE Mar (Rs mn) FY22A FY23A FY24E FY25E FY26E
Interest earned 59,217 82,054 1,31,722 1,61,933 2,04,146 Share capital 3,562 7,108 8,008 8,008 8,008
Interest expended 26,876 37,801 63,170 78,043 93,345 Reserves & surplus 71,578 1,02,666 1,40,170 1,60,830 1,88,557
Net Interest Income 32,341 44,253 68,552 83,890 1,10,801 Deposits 5,25,846 6,93,650 9,87,587 12,34,201 15,43,929
Other income 9,937 10,345 20,038 25,177 29,298 Borrowings 59,908 62,987 73,731 98,115 1,24,602
Total Income 42,278 54,597 88,590 1,09,067 1,40,099 Other Liabilities 29,884 35,751 31,930 43,104 53,438
Operating Expenses 24,128 34,403 55,969 71,608 86,532 Total liabilities 6,90,778 9,02,161 12,41,426 15,44,258 19,18,534
Employees 13,789 17,930 28,590 33,715 41,273 Cash balances with RBI 24,684 35,471 78,468 97,437 1,21,826
Others 10,339 16,472 27,379 37,893 45,259 Balances with banks 34,601 58,781 10,199 17,993 22,484
PPoP 18,150 20,195 32,621 37,459 53,567 Investments 1,53,065 2,00,720 2,75,447 3,41,680 4,27,234
Provisions 3,610 1,549 7,315 11,462 15,626 Advances 4,60,953 5,84,215 8,43,401 10,45,817 12,96,175
Profit before tax 14,540 18,646 25,306 25,997 37,940 Fixed Assets 6,226 7,401 9,159 10,533 12,113
Taxes 3,242 4,367 6,367 7,172 9,546 Other Assets 11,250 15,573 24,744 30,789 38,695
Net Profit 11,298 14,279 18,939 18,826 28,394 Total assets 6,90,778 9,02,161 12,41,426 15,44,258 19,18,534

Ratios* Ratios*
YE Mar FY22A FY23A FY24E FY25E FY26E YE Mar (Rs mn) FY22A FY23A FY24E FY25E FY26E
Growth (%) Balance Sheet (%)
Loans 33.2 26.7 25.6 24.0 23.9 Loans / Deposits 87.7 84.2 85.4 84.7 84.0
Deposits 46.2 31.9 27.6 25.0 25.1 Investments / Deposits 29.1 28.9 27.9 27.7 27.7
RWA growth 30.2 33.2 24.1 26.7 26.2 CASA 37.3 38.4 31.5 30.7 32.0
NII 36.7 36.8 24.3 22.4 32.1 Assets/equity (x) 9.2 8.2 8.4 9.1 9.8
Other income (30.1) 4.1 58.9 25.6 16.4 RWA / Total assets 52.7 53.8 54.8 55.8 56.7
Opex 46.9 42.6 29.7 27.9 20.8 Capital ratios (%)
PPoP (15.3) 11.3 32.5 14.8 43.0 CET-1 19.7 21.8 21.0 19.0 17.6
Provisions (46.1) (57.1) 56.3 56.7 36.3 Tier-1 19.7 21.8 21.0 19.0 17.6
Net profit (4.8) 26.4 23.7 (0.6) 50.8 Tier-2 1.3 1.8 1.4 1.1 0.9
Profitability (%) CRAR 21.0 23.6 22.4 20.1 18.5
Yield on assets 10.0 10.8 12.3 12.3 12.4 Asset quality ratios (%)
Cost of funds 5.3 5.6 6.6 6.5 6.2 GNPA (Rs mn) 9,244 9,813 17,371 25,616 35,118
NIM 5.5 5.8 6.4 6.4 6.8 NNPA (Rs mn) 2,719 2,862 6,189 9,321 11,927
Other income / Total inc. 23.5 18.9 22.6 23.1 20.9 GNPA 2.0 1.7 2.0 2.3 2.6
Other inc. / avg assets 1.6 1.3 1.8 1.8 1.7 NNPA 0.5 0.4 0.7 0.8 0.9
Cost/Income 57.1 63.0 63.2 65.7 61.8 PCR 75.0 75.0 64.4 63.6 66.0
Employee 32.6 32.8 32.3 30.9 29.5 Slippage 3.4 2.3 2.2 2.5 2.6
Other 24.5 30.2 30.9 34.7 32.3 NNPA / Equity 3.6 2.6 4.2 5.5 6.1
Opex/ Avg assets 4.0 4.3 4.9 5.1 5.0 Per share
Provisioning cost 0.9 0.3 0.9 1.2 1.3 EPS 35.9 21.4 25.5 25.4 38.3
Tax rate 22.3 23.4 25.2 27.6 25.2 BVPS 238.6 164.6 199.7 227.5 264.9
RoE 16.4 15.4 14.0 13.5 15.5 ABVPS 228.7 159.7 190.5 214.1 248.0
RoA 1.9 1.8 1.7 1.5 1.6 Valuation (x)
RoRWA 3.5 3.4 3.1 2.4 2.9 P/E 18.6 31.1 21.9 22.1 14.6
Du-pont (%) P/BV 2.8 4.0 2.8 2.5 2.1
Interest income 9.8 10.3 11.6 11.6 11.8 P/ABV 2.9 4.2 2.9 2.6 2.3
Interest expenses 4.5 4.7 5.6 5.6 5.4 Source: Company, Centrum Broking *FY22 & FY23 are standalone numbers
NII 5.4 5.6 6.0 6.0 6.4
Other income 1.6 1.3 1.8 1.8 1.7
Total income 7.0 6.9 12.9 13.1 13.1
Operating expenses 4.0 4.3 4.9 5.1 5.0
Employee 2.3 2.3 2.5 2.4 2.4
Other 1.7 2.1 2.4 2.7 2.6
PPOP 3.0 2.5 2.9 2.9 3.1
Provisions 0.6 0.2 0.6 0.8 0.9
PBT 2.4 2.3 2.2 2.0 2.2
Tax 0.5 0.5 0.6 0.5 0.6
RoA 1.9 1.8 1.7 1.5 1.6
Source: Company, Centrum Broking *FY22 & FY23 are standalone numbers

Centrum Institutional Research 8

AU Small Finance Bank 19 March, 2024

Disclaimer
Centrum Broking Limited (“Centrum”) is a full-service, Stock Broking Company and a member of The Stock Exchange, Mumbai (BSE) and National Stock
Exchange of India Ltd. (NSE). Our holding company, Centrum Capital Ltd, is an investment banker and an underwriter of securities. As a group Centrum has
Investment Banking, Advisory and other business relationships with a significant percentage of the companies covered by our Research Group. Our research
professionals provide important inputs into the Group's Investment Banking and other business selection processes.
Recipients of this report should assume that our Group is seeking or may seek or will seek Investment Banking, advisory, project finance or other businesses
and may receive commission, brokerage, fees or other compensation from the company or companies that are the subject of this material/report. Our
Company and Group companies and their officers, directors and employees, including the analysts and others involved in the preparation or issuance of this
material and their dependants, may on the date of this report or from, time to time have "long" or "short" positions in, act as principal in, and buy or sell the
securities or derivatives thereof of companies mentioned herein. Centrum or its affiliates do not own 1% or more in the equity of this company Our sales
people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that
are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with
the recommendations expressed herein. We may have earlier issued or may issue in future reports on the companies covered herein with recommendations/
information inconsistent or different those made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other
things, may give rise to or potential conflicts of interest. We and our Group may rely on information barriers, such as "Chinese Walls" to control the flow of
information contained in one or more areas within us, or other areas, units, groups or affiliates of Centrum. Centrum or its affiliates do not make a market in
the security of the company for which this report or any report was written. Further, Centrum or its affiliates did not make a market in the subject company’s
securities at the time that the research report was published.
This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy,
purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in connection with
any contract or commitment whatsoever. This document does not solicit any action based on the material contained herein. It is for the general information
of the clients of Centrum. Though disseminated to clients simultaneously, not all clients may receive this report at the same time. Centrum will not treat
recipients as clients by virtue of their receiving this report. It does not constitute a personal recommendation or take into account the particular investment
objectives, financial situations, or needs of individual clients. Similarly, this document does not have regard to the specific investment objectives, financial
situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be
suitable for all investors. The securities described herein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which
the companies mentioned in this report are organized may have restrictions on investments, voting rights or dealings in securities by nationals of other
countries. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Persons who may
receive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek
professional/financial advice. Any such person shall be responsible for conducting his/her/their own investigation and analysis of the information contained
or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this document.
The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant
uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on
which the projections and forecasts were based will not materialize or will vary significantly from actual results, and such variances will likely increase over
time. All projections and forecasts described in this report have been prepared solely by the authors of this report independently of the Company. These
projections and forecasts were not prepared with a view toward compliance with published guidelines or generally accepted accounting principles. No
independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not regard the inclusion of
the projections and forecasts described herein as a representation or warranty by or on behalf of the Company, Centrum, the authors of this report or any
other person that these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you should only consider the projections
and forecasts described in this report after carefully evaluating all of the information in this report, including the assumptions underlying such projections and
forecasts.
The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors may realize
losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital may occur.
Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without
notice. Centrum does not provide tax advice to its clients, and all investors are strongly advised to consult regarding any potential investment. Centrum and
its affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Foreign currencies denominated securities are subject
to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in
securities such as ADRs, the value of which are influenced by foreign currencies effectively assume currency risk. Certain transactions including those involving
futures, options, and other derivatives as well as non-investment-grade securities give rise to substantial risk and are not suitable for all investors. Please
ensure that you have read and understood the current risk disclosure documents before entering into any derivative transactions.
This report/document has been prepared by Centrum, based upon information available to the public and sources, believed to be reliable. No representation
or warranty, express or implied is made that it is accurate or complete. Centrum has reviewed the report and, in so far as it includes current or historical
information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. The opinions expressed in this document/material
are subject to change without notice and have no obligation to tell you when opinions or information in this report change.
This report or recommendations or information contained herein do/does not constitute or purport to constitute investment advice in publicly accessible
media and should not be reproduced, transmitted or published by the recipient. The report is for the use and consumption of the recipient only. This publication
may not be distributed to the public used by the public media without the express written consent of Centrum. This report or any portion hereof may not be
printed, sold or distributed without the written consent of Centrum.
The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform
themselves about, and observe, any such restrictions. Neither Centrum nor its directors, employees, agents or representatives shall be liable for any damages
whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the
information.
This document does not constitute an offer or invitation to subscribe for or purchase or deal in any securities and neither this document nor anything contained
herein shall form the basis of any contract or commitment whatsoever. This document is strictly confidential and is being furnished to you solely for your
information, may not be distributed to the press or other media and may not be reproduced or redistributed to any other person. The distribution of this
report in other jurisdictions may be restricted by law and persons into whose possession this report comes should inform themselves about, and observe any
such restrictions. By accepting this report, you agree to be bound by the fore going limitations. No representation is made that this report is accurate or
complete.

Centrum Institutional Research 9

AU Small Finance Bank 19 March, 2024

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of Centrum Broking and
are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a view as of the date of this report
and there can be no assurance that future results or events will be consistent with any such opinions, estimate or projection.
This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its
directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its directors
or any other person. Any opinions and projections contained herein are entirely those of the authors. None of the company or its directors or any other person
accepts any liability whatsoever for any loss arising from any use of this document or its contents or otherwise arising in connection therewith.
Centrum and its affiliates have not managed or co-managed a public offering for the subject company in the preceding twelve months. Centrum and affiliates
have not received compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for
service in respect of public offerings, corporate finance, debt restructuring, investment banking or other advisory services in a merger/acquisition or some
other sort of specific transaction.
As per the declarations given by them, Mr. Shailesh Kanani, research analyst and and/or any of their family members do not serve as an officer, director or any
way connected to the company/companies mentioned in this report. Further, as declared by them, they are not received any compensation from the above
companies in the preceding twelve months. They do not hold any shares by them or through their relatives or in case if holds the shares then will not to do
any transactions in the said scrip for 30 days from the date of release such report. Our entire research professionals are our employees and are paid a salary.
They do not have any other material conflict of interest of the research analyst or member of which the research analyst knows of has reason to know at the
time of publication of the research report or at the time of the public appearance.
While we would endeavour to update the information herein on a reasonable basis, Centrum, its associated companies, their directors and employees are
under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent Centrum from
doing so.
Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable
regulations and/or Centrum policies, in circumstances where Centrum is acting in an advisory capacity to this company, or any certain other circumstances.
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state,
country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Centrum
Broking Limited or its group companies to any registration or licensing requirement within such jurisdiction. Specifically, this document does not constitute an
offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirmation of any transaction to any U.S. person
unless otherwise stated, this message should not be construed as official confirmation of any transaction. No part of this document may be distributed in
Canada or used by private customers in United Kingdom. The information contained herein is not intended for publication or distribution or circulation in any
manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly
authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and
Exchange Board of India before investing in Indian Securities Market.

Ratings definitions
Our ratings denote the following 12-month forecast returns:
Buy – The stock is expected to return above 15%.
Add – The stock is expected to return 5-15%.
Reduce – The stock is expected to deliver -5-+5% returns.
Sell – The stock is expected to deliver <-5% returns.
AU Small Finance Bank

Source: Bloomberg

Centrum Institutional Research 10

AU Small Finance Bank 19 March, 2024

Disclosure of Interest Statement

1 Business activities of Centrum Broking Centrum Broking Limited (hereinafter referred to as “CBL”) is a registered member of NSE (Cash, F&O and Currency Derivatives
Limited (CBL) Segments), MCX-SX (Currency Derivatives Segment) and BSE (Cash segment), Depository Participant of CDSL and a SEBI registered
Portfolio Manager.
2 Details of Disciplinary History of CBL CBL has not been debarred/ suspended by SEBI or any other regulatory authority from accessing /dealing in securities market.

3 Registration status of CBL: CBL is registered with SEBI as a Research Analyst (SEBI Registration No. INH000001469)

AU Small Finance Bank

4 Whether Research analyst’s or relatives’ have any financial interest in the subject company and nature of such financial interest No

5 Whether Research analyst or relatives have actual / beneficial ownership of 1% or more in securities of the subject company at the end of the month
No
immediately preceding the date of publication of the document.
6 Whether the research analyst or his relatives has any other material conflict of interest No

7 Whether research analyst has received any compensation from the subject company in the past 12 months and nature of products / services for which
No
such compensation is received
8 Whether the Research Analyst has received any compensation or any other benefits from the subject company or third party in connection with the
No
research report
9 Whether Research Analysts has served as an officer, director or employee of the subject company No

10 Whether the Research Analyst has been engaged in market making activity of the subject company. No

11 Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past twelve months; No

Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company
12 No
in the past twelve months;
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage
13 No
services from the subject company in the past twelve months;

Member (NSE and BSE). Member MSEI (Inactive)

Single SEBI Regn. No.: INZ000205331

Depository Participant (DP)

CDSL DP ID: 120 – 12200
Single SEBI Regn. No.: IN-DP-537-2020

PORTFOLIO MANAGER

SEBI REGN NO.: INP000004383

Research Analyst
SEBI Registration No. INH000001469

Mutual Fund Distributor

AMFI REGN No. ARN- 147569

Website: www.centrumbroking.com
Investor Grievance Email ID: investor.grievances@centrum.co.in

Compliance Officer Details:

Ajay S Bendkhale
(022) 4215 9000/9023; Email ID: compliance@centrum.co.in

Centrum Broking Ltd. (CIN :U67120MH1994PLC078125)

Registered and Corporate Office:
Level -9, Centrum House, C.S.T. Road,
Vidyanagari Marg, Kalina,
Santacruz (East) Mumbai – 400098
Tel.: - +91 22 4215 9000

Centrum Institutional Research 11