AU SFB’s AUM grew by 49.8% YoY (11.4 %QoQ) to INR 242.46bn (above CSEC estimate of 46% YoY) with major contribution coming from, NBFC and MSME segments, which grew by 64.7% YoY and 53.9% YoY respectively. Retail assets grew by a healthy 48.8% YoY, with Wheels and MSME segments contributing 42% and 32% respectively to the overall AUM. Disbursements for the quarter also demonstrated a growth of 19.6% YoY and stood at INR 50.3bn. Going forward, the management has guided that SBL, MSME and wheels (more focused on used wheel and cash on wheel which normally has higher yields) segments will continue to grow at 30%+YoY. Deposits grew at a robust pace to reach INR 170.8bn during 3QFY19 (beating CSEC estimate of INR 167.4bn) growing from INR 125.73bn in 3QFY19 (35.8% QoQ). Term deposits grew by 40.3% QoQ, whereas CASA deposits grew at a slower pace of 21.2% QoQ. CASA growth was predominantly led by uptick in demand deposits by 107% QoQ. Consequently, CASA as a share of deposit dipped to 21% from 24% in 3QFY19.
Improved margins due to falling cost of funds (with increased share of deposits in external funds), along with healthy loan book growth should act as a catalyst to spur the earnings growth of the company. The stock is currently trading at 3.6X P/ABV and 16.8X P/E of FY21E. We rate the stock a BUY, with a target price of INR 732, assigning a P/ABV of 4.2X of FY21E, with an upside of 18% from CMP.