Equitas Small Finance Bank Ltd Q2FY26 – The Microfinance Marvel That Went From Profit to Pothole and Now Trying to Patch It With Deposits & Determination
1. At a Glance
Equitas Small Finance Bank (NSE: EQUITASBNK) has had a rollercoaster year — and not the fun kind. After a disastrous Q1FY26 loss of ₹224 crore, it somehow found its financial brakes and posted a Q2FY26 PAT of ₹24 crore, proving that miracles can occur between two balance sheets. Revenue stood at ₹1,617 crore, up 4% QoQ, while gross NPA stuck around at 2.92% — the kind of “stable” that auditors describe with heavy sighs.
At a market cap of ₹6,484 crore and trading at ₹57, the stock looks like that student who used to top class in FY22 but now just wants to pass. The book value of ₹51.4 keeps it grounded, while ROE is crawling at 2.43%, and ROA is barely 0.3%, proving that profitability has left the WhatsApp group.
Despite the heartbreak numbers, Equitas remains one of the cleaner and more diversified small finance banks with a loan book of ₹34,337 crore and deposits of ₹44,000+ crore, spread across 18 states and UTs. The only question is — will they rise again, or will FY26 be another year of “technical glitches and Tier-II excuses”?
2. Introduction
Once upon a time in Chennai, Equitas dreamed of becoming the “next big thing” in financial inclusion — and to be fair, it was doing quite well. The bank started in 2007 as a microfinance player, morphed into a multi-segment lender by 2013, and became a full-fledged bank in 2016. For a while, it was the poster child of SFB success — fancy fintech vibes, rapid branch expansion, and even a CSK partnership (because nothing says credibility like Dhoni on your hoarding).
Fast-forward to FY26, and the picture looks… let’s say, “less Super, more Kings.” After riding high on strong advances growth, Equitas got smacked by rising cost of funds, accounting adjustments, and RBI penalties (₹65 lakh for non-compliance — basically, a financial version of “go stand outside the class”).
Yet, it’s not all gloom. CASA remains a solid 32%, NIMs at 8.36%, and capital adequacy still royal at 20.7%. Management calls the last two quarters “transitional.” Investors call it “painful.”
Can Equitas go from a small finance struggler back to the “AUSFB-level” club? Let’s lift the hood.
3. Business Model – WTF Do They Even Do?
Equitas is like a modern-day money mechanic. It lends to small businesses, drivers, and households who traditional banks often ignore. Their loan mix reads like a spicy South Indian thali:
Small Business Loans (38%) – The sambhar of their portfolio; reliable, scalable, and recurring.
Vehicle Finance (24%) – For those who run small transport fleets or own autos; the segment’s breadwinner.
Microfinance (18%) – High-yield but high-risk; the fiery pickle.
Housing Finance (12%) – Safe and slow, like curd rice.
MSME + NBFC lending (6%) – Small but growing sides.
Deposits are equally mixed, with a focus on retail and CASA (Current Account Savings Account) at 32%. The bank’s network of 964 branches and 365 ATMs across 18 states ensures both reach and resilience — though Tamil Nadu still dominates with 49% of advances and 28% of deposits.
Essentially, Equitas isn’t just lending money — it’s trying to make banking accessible for those who don’t have fancy suits or LinkedIn bios. But when the cost of funds rises faster than your Netflix subscription, even noble causes hurt margins.
4. Financials Overview
Metric
Latest Qtr (Q2FY26)
YoY Qtr (Q2FY25)
Prev Qtr (Q1FY26)
YoY %
QoQ %
Revenue
₹1,617 Cr
₹1,555 Cr
₹1,649 Cr
+4.0%
-1.9%
PAT
₹24 Cr
₹198 Cr
₹-224 Cr
-87.9%
🔼 turnaround
GNPA
2.92%
2.95%
2.92%
flat
flat
NNPA
0.98%
0.97%
0.98%
flat
flat
EPS (₹)
0.21
1.77
-1.96
-88%
turnaround
💬 Commentary: The quarter looked like a resurrection arc — from negative to mildly positive. Profit jumped 87% QoQ, but YoY numbers are down bad. The good news? NPAs are contained, and the bad debt monster hasn’t returned (yet).
5. Valuation Discussion – Fair Value Range
Let’s be academic for a moment before the sarcasm resumes.
Book Value (BV): ₹51.4 | P/BV: 1.11x | EPS (TTM): -₹0.8 | ROE: 2.43%
Method 1: P/BV-based Valuation Comparable SFBs trade between 1.0x (Utkarsh, Suryoday) and 3.0x (AU Bank). Given Equitas’s stress and
