Equitas Small Finance Bank Limited (EQUITASBNK) Q1 2027 Earnings Call Transcript

“Equitas Small Finance Bank Limited Results Q1 FY27 Conference Call”

July 29, 2026

MANAGEMENT: MR. P. N. VASUDEVAN – MD & CEO MR. BALAJI N – EXECUTIVE DIRECTOR & HEAD (OPERATIONS & INFORMATION TECHNOLOGY) MR. MUKUND SHYAMRAO BARSAGADE – CHIEF FINANCIAL OFFICER MR. JAGADESH J – HEAD (ASSETS) MR. MURALI VAIDYANATHAN – SENIOR PRESIDENT & COUNTRY HEAD (BRANCH BANKING, LIABILITIES, PRODUCTS & WEALTH) MR. GOPALAKRISHNAN – HEAD (TREASURY) MR. SURESH G. – HEAD (STRATEGY & BUSINESS INTELLIGENCE) MR. SUNDARARAMAN D – HEAD (INVESTOR RELATIONS) MR. ABESHEK C V – SPECIALIST (INVESTOR RELATIONS)

Equitas Small Finance Bank Limited July 29, 2026 Moderator:

Ladies and Gentlemen, Good Day and Welcome to Earnings Call of Equitas Small Finance Bank Limited Financial Performance for Q1 FY27. We have with us today Mr. P N Vasudevan – M.D. & CEO, Mr. Balaji N – Executive Director & Head of Operations and Information Technology, Mr. Mukund Shyamrao Barsagade – CFO, Mr. Jagadesh J – Head of Assets, Mr. Murali Vaidyanathan – Senior President and Country Head (Branch Banking, Liabilities, Product and Wealth,) Mr. Gopalakrishnan – Head (Treasury), Mr. Suresh – Head (Strategy and Business Intelligence), Mr. Sundararaman D – Head (Investor Relations), Mr. Abeshek – Specialist (Investor Relations). As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing “*” then “0” on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. P N Vasudevan. Thank you and over to you, sir.

P N Vasudevan:

Good morning and thank you for taking the time to join us today. To start with, I am pleased to introduce our new CFO – Mr. Mukund, who has joined Equitas' leadership team recently after Sridharan, the earlier CFO, had retired after being associated with Equitas for over 15-years. Mukund brings with him extensive experience across finance, strategy, business planning with a strong track record of driving financial discipline and supporting scalable growth. We are delighted to have him on board and confident that his experience and insight will contribute significantly to Equitas' growth in the next phase. This is Mukund's first earnings call at Equitas and I would like to extend a warm welcome time. Coming to Q1 of current financial year business performance, despite a challenging operating environment and continued impact of elevated funding cost, the bank delivered a resilient and steady performance during Q1. Our gross advances grew by 27% year-on-year to Rs.47,640 crores, driven by broad-based growth across key asset classes. We continue to see strong momentum in the small business loan, housing finance and vehicle finance, while used commercial vehicles and used cars delivered a particularly robust growth of 25% and 30% respectively. Our microfinance continues to perform well, reflecting the disciplined portfolio management. The X Bucket collection efficiency in microfinance remained strong during the quarter at 99.7%, while the 1-to-90 DPD in microfinance has improved by 14 basis points at 1.1%, indicating continued normalisation of the portfolio behaviour. Other products like gold and AHF are also showing traction. Encouragingly, despite the geopolitical tension in West Asia and the associated macroeconomic uncertainties, the quality of retail and vehicle finance portfolio remains intact. We are confident on

Equitas Small Finance Bank Limited July 29, 2026 the stated guidance of 20%-plus advances growth for the current financial year. Mr. Jagadesh, Head of Assets, will explain in detail our strategic priorities, growth drivers and targets. On the deposit front, the total deposits grew by 10% year-on-year and 5% sequentially to around Rs.48,900 crores. Our CASA ratio stood at 25%, while retail deposits continue to account for a stable 65% of the overall deposit base. While the increase in savings on term deposit rates recently has led to a rise in funding costs by 11 bps sequentially, our focus remains on building relationship-led deposit franchise across retail, affluent, business banking and NRI segments. We are seeing a good traction in the new FCNR (B) as well as retail domestic deposit flow in the current month of July, and we are looking at a better deposit growth in the second quarter. Murali Vaidyanathan, Head of Liabilities, will explain in detail the Strategies that drive Deposit Growth. Our initiatives on IT remain robust. A few key apps such as Enterprise LOS and Litigation Management System are being developed in-house and should be launched during the year. The first few projects using AI are underway and we expect to see the first feel of the benefit of usage of AI in the bank in the coming couple of quarters. Even though the first quarter is seasonally supposed to be the weakest quarter for the industry, we have seen one of our best performance in the first quarter compared to the same quarter over the past few years, be it in advance growth, credit cost or cost-to-asset ratio. We have guided for a 20%-plus advance growth and an ROA of about 1.2% for the full year. The first quarter momentum gives us confidence that we should be able to deliver beyond our guidance on both the fronts. Overall, this performance reflects the strength of our franchise and the execution of our strategic priorities are increasingly reflected in our financial outcomes. The benefit of our balance sheet growth, improving portfolio diversification and sustained progress in asset quality are now becoming more visible across our key earnings metrics. These efforts help us to strengthen the quality of growth while maintaining a prudent approach to risk and capital management. We had conducted an “Investor Day Meeting” in the month of June and had set out a Five-Year Vision for the bank and we remain committed to delivering the same. Thank you and with this, I hand over to Mukund.

Equitas Small Finance Bank Limited July 29, 2026 Mukund S. Barsagade:

Thank you, sir. Good morning, everyone. As this is my first opportunity to engage with many of you in my role at Equitas, I would like to begin by expressing my sincere gratitude to the board, our M.D. and CEO, Vasu Sir and the leadership team for their trust, confidence and support. I would like to extend a warm welcome and heartfelt thanks to all our investors, analysts and stakeholders who have joined us today. We value your continued interest in Equitas and greatly appreciate the trust and confidence you have placed in us over the years. Let me briefly walk you through the “Financial Performance for the Quarter.” The Summary of the Details are available in our Investor Presentation. We reported a net interest income of Rs.1,030 crores and other income of Rs.250 crores, bringing our total net income to Rs.1,280 crores for the quarter. Total net income grew by 19% year-on-year and 3% quarter-on-quarter. Effective Q1 FY27, NIM is reported based on daily average interest earning assets, replacing the earlier methodology based on the average of opening and closing interest earning assets for the quarter. NIM stood at 7.24% for Q1 FY27, a decline of 12 basis points quarter-on-quarter due to the increase in cost of funds. Total operating expenses were at Rs.875 crores, up 16% year-on-year and 5% quarter-on-quarter, reflecting the impact of annual increments during the quarter and increase in the employee count on year-on-year basis. Cost-to-assets declined by 14 basis points quarter-on-quarter to 5.61% in Q1 FY27 as compared to 5.75% in Q4 FY26. Cost-to-income ratio stood at 68.38% in Q1 FY27 as compared to 67.52% in Q4 FY26 and 70.62% in Q1 FY26. The bank reported a quarterly profit tax of Rs.184 crores as compared to a loss of Rs.224 crores in Q1 FY26. Return on assets and return on equity for Q1 FY27 were at 1.18% and 11.76% respectively. Moving to the asset quality, gross NPA reduced by 13 basis points quarter-on-quarter to 2.36% as compared to 2.49% in Q4 FY26. Net NPA increased by 2 basis points quarter-on-quarter to 0.70% in Q1 FY27 as compared to 0.68% in Q4 FY26. Credit costs on average gross advances declined significantly to 1.37% in Q1 FY27 as compared to 6.48% in Q1 FY26. Provision coverage ratio remained stable at 71.02% including technical writeoffs, provision coverage ratio stands at 86.96%. Moving further, gross advances grew 27% year-on-year to Rs.47,641 crores driven by robust disbursement across products. On liabilities, total deposits grew 10% year-on-year and 5% quarter-on-quarter to Rs.48,976 crores. CASA ratio stands at 25%.

Equitas Small Finance Bank Limited July 29, 2026 As of June 30, 2026, our capital adequacy ratio stood at 19.44%, Tier-1 capital at 16.01% and Tier2 at 3.43%. Thank you. I will now hand it over to Mr. Jagadesh. Jagadesh J:

Good morning everyone and thank you for joining us. Before I begin the deep dive into our advances portfolio, let me briefly touch upon the current situation. As of now, we have not observed any visible stress in our portfolio attributable to the ongoing developments in West Asia. We continue to closely monitor the situation and remain watchful of any potential developments. Business momentum remains steady during the quarter, supported by disciplined underwriting and stable collection performance. Against this backdrop, let me now walk you through the key trends in our advances portfolio. We have closed the quarter with gross advances of Rs.47,641 crores, reflecting a growth of 27% yearon-year, which is driven by a strong disbursement growth. Let me walk you through some “Key Highlights.” We have delivered the highest-ever first quarter disbursement of Rs.6,784 crores in Quarter 1, a growth of 93% year-on-year. Microfinance disbursement at Rs.1,343 crores in this quarter, which constitutes around 11% of the overall loan mix, and we intend to maintain it around 10% going forward. Including DA book, MFI currently stands at 13%. In addition to that, 87% of our organic MFI book is covered under CGFMU. On the non-MFI front, our disbursements were at Rs.5,441 crores in this quarter, a growth of 68% year-on-year. Our non-MFI book, which is a secured one, now stands at Rs.41,623 crores, marking a 22% year-on-year growth. Our small business loan portfolio continues to be the largest contributor with Rs.19,249 crores, growing at 15% year-on-year, and notably, our secured business loans within SBL saw a robust 32% year-on-year growth. And vehicle finance grew 15% year-on-year. And within vehicle finance, used commercial vehicles grown by 25% year-on-year and used cars posted a strong growth of 30% year-on-year. Our strategic focus remains on used CV and used cars, which continue to show resilience. Our housing finance grew 24% year-on-year and MFI finance grew by 28%.

Equitas Small Finance Bank Limited July 29, 2026 Coming to the yield and asset quality front, the yield on gross advances increased by 23 bps quarteron-quarter to 15.74%, and non-MFI yield increased by 4 bps quarter-to-quarter to 14.89%. Our asset quality continues to be in an improving trend. Our net slippages at 1.43% in Q1, the second lowest among the first quarters over the last five years. Our GNP at 2.36% is lowest among the last two financial years. Credit cost stood at 1.37% in this quarter versus 6.48% in Q1 of FY26. Adjusting for the Rs.29 crores stress sector positioning reversal in Q4 FY26, credit cost would have been approximately 1.38% in Q4, broadly in line with the current quarter, indicating the stable underlying credit cost on a sequential basis. In microfinance, the 1-to-90 DPD declined to 1.10% from 1.34% in Q4, driven by enhanced collection efficiency. The expected collection efficiency at the POS level was 99.7% in Q1, reflecting the stability. I would like to conclude that even in a seasonally weak quarter, we delivered strong performance in disbursement and asset quality across products. We expect this momentum to sustain in the quarters again. Thank you and I now hand over to Murali. Murali Vaidyanathan:

Good morning, friends. I would like to take you through what is happening on the liabilities front. We continue to build a healthy momentum with total deposits growing sequentially by 5% and book reaching closer to Rs.49,000 crores. And in this, the composition is 25% of that money coming from CASA and CASA plus RTD accounts closer to 66% of our total deposit base. This reflects the strength and granularity of our franchise and bank. It is also noteworthy that 91% of our bulk deposits are non-callable in nature in a duration of one year. This provides the greater stability to our funding profile and limiting the repricing risk which happens on the same year. The FCNR we have launched through the AD1 Project, which has gone live. Pre-swap and postswap, we are seeing a healthy traction and we have crossed close to Rs.42 million already. This will add the diversified as well as opportunity for customer towards hedging and an opportunity for us to build the dollar balance sheet.

Equitas Small Finance Bank Limited July 29, 2026 On a daily average cost of funds, it increased by 11 bps. We actually tweaked our SA pricing and we have launched a branded FD product called Maxima with three year, one day as a duration and that is showing enough traction. So, the culmination of both has increased the cost of funds and moving up to 7.05% from 6.94%. We are also encouraged by the response to a recently launched Artha proposition targeting HNI and HNI+. The proposition as well as segmentation is helping us to penetrate into the HNI segment very deeply and high value customers are enjoying the premium banking proposition along with the user convenience. In addition to that, we have specific proposition Elite Epic for NRI, which is showing a traction in terms of rupee as well as dollar-denominated feature. And Elite Lite which we launched three months back for emerging affluent is showing in terms of number and value. So, both the offerings are witnessing encouraging traction and helping us to expand our reach across key segmentation. So, with a strong retail franchisee, differentiated customer proposition and customer segments along with customer-centric approach towards mobilization of deposits and building balance sheet, we remain well positioned to support the bank's funding requirements as we move forward. Thank you. I hand it over to Gopi. Gopalakrishnan:

Good morning, everyone. The quarter went by was very challenging given continued unpredictable geopolitical situation in West Asia, exerting severe pressure on rupee and other domestic assets due to higher crude prices. Financial markets continue to exhibit volatility with uncertainty continuing to impact treasury revenue. Our treasury income stood at Rs.31 crores in Q1 FY27. Foreign investors have retreated to safe haven investments while placing large bets on AI, causing India to miss out on inward dollar flows. Rupee depreciation pressure continues. However, the measure announced by RBI in June to attract external flows, have got off to a good start, garnering over $20 billion. In the immediate term, CPI is expected to broadly remain within MPC inflation target, skewed towards the upper end.

Equitas Small Finance Bank Limited July 29, 2026 Longer-term effects of imported inflation and this year's monsoon shortfall are likely to see some upside risk materialize against current RBI projections. Government bonds saw the benchmark 10-year yield exhibit heightened volatility during the quarter, closing it at 6.77%. The yields have mirrored volatility in crude prices and geopolitical cues, and this is likely to continue till a definitive end to tensions in West Asia is in sight. We approach the coming quarter with caution given the continued volatility. Thank you. Moderator:

The first question comes from the line of Heet Khimawat from IIFL Capital Services. Please go ahead.

Heet Khimawat:

Hi, sir. Thank you for the opportunity. Firstly, on the funding side, maybe Murali sir, you could take this. The share of bulk has gone up in this quarter and we are also seeing in the last couple of years the share of individual depositors in our deposit base has been coming down while banks and government bodies share has been going up. So, just wanted to understand what is happening here and how do we see this trend in the medium-term? Just wanted to understand the marginal cost of funding that we would be seeing in this quarter and how would that compare versus the current cost of funds that we are seeing, mainly in the near-term, in the next one or two quarters, can the marginal cost remain at the current levels and would that be higher or lower than the current cost of funds? That would be my first question.

Murali Vaidyanathan:

Thank you. See, first, on the retail to bulk side, there are three divisions. We have given it on the slides, which is greater than Rs.3 crores to Rs.10 crores, Rs.10 crores to Rs.50 crores and greater than Rs.50 crores as a bucket. So, in this government bodies and institution, and we have something called cooperative banks. Today, cooperative banks accounts to close to 18% of the book and government bodies and institution contributes to 12% of the book. That is how this 30% of the book is coming in for bulk TD requirement. The expansion into the government actually helped us to mobilize. So, the overall pie at this point of time looks like 68% coming from individuals as well as HUF and balance 30% coming from institutions. When we pick up, that is recently what we have done on FCNR as well as Maxima pick up, over a period of six months, it will gradually come down to earlier thing of either 70-30 or 72-28 over two quarters. That is what is expected on the funding side.

Heet Khimawat:

Got it. And just on the marginal cost of fund, basically –

Suresh:

Yes, on the marginal cost of fund side, if you look at it currently, we are at about 8%. And the current outlook from that point of view, we still believe maybe around this mark only we will be having it as we move forward as well.

Heet Khimawat:

Got it. Secondly, on the MFI slippages, so we have seen that coming down. However, the non-MFI slippages have inched up in this quarter. So, I just wanted to understand if there is any seasonality

Equitas Small Finance Bank Limited July 29, 2026 coming from the vehicle book that we normally see in Q1 or is this from any other non-MFI segments? And how do we explain this to trend in the coming quarters? Jagadesh J:

Yes, this is Jagadesh. So, slippages has been better compared to the last Q1 of the financial year. If you look at the net slippages, the current net slippages is Rs.151 crores, MF is Rs.30 crores and nonMF is Rs.120 crores. If you look at the last financial year Quarter 1, it is Rs.453 crores and MF is Rs.230 crores, so, which effectively is Rs.220 crores. It is better compared to the corresponding quarter of the previous year. And normally the Q1 is based on the seasonal. We see better improvement in the asset quality going forward.

Heet Khimawat:

Yes. So, mainly non-MFI would be largely seasonal from vehicle maybe, just wanted to understand that?

Jagadesh J:

Yes, it is a seasonal.

Heet Khimawat:

Got it. And lastly, on the MFI side, so we have said DA book of around Rs.1,340 crores which came in 3Q. So, what is the rundown that we are seeing or by when can we expect this to run off in how many quarters?

Jagadesh J:

Currently, we have Rs.838 crores. By Q4, it would come around close to Rs.150 crores.

Heet Khimawat:

Got it. Sure, sir. That is helpful. That is all from my side. Thank you so much.

Moderator:

The next question comes from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.

Vivek Ramakrishnan:

Sir, good morning. You had mentioned about capital optimization a couple of quarters ago which included CGFMU and so on. But is there any chance of increasing your DA or securitization book so that you can grow while maintaining a slightly higher capital adequacy? Now, you are at 16% in Tier-1 and so I want to know where you would expect it to be, let us say, in the end of Q4 given your strong growth?

P N Vasudevan:

Yes. So, there are a lot of levers for capital preservation that we have been using over the last few quarters. So, we will continue to do that. In fact, in the first quarter of this financial year, we did do a DA of around Rs.500 crores of the affordable housing book which released a little bit of capital. We are also actively getting our vehicle finance portfolio covered under CGTMSE which again releases capital. And then, of course, the IBPC is always a tool available to sell down and preserve the capital and focus on lower risk-weighted assets like housing finance or gold loans to conserve capital. So, there are a lot of levers and we continue to use all the levers available to us. CGFMU, of course, is one more lever. Today, I think out of our own microfinance book, just taking the DA part of it out, almost 87% of the microfinance book is covered under CGFMU which not only mitigates

Equitas Small Finance Bank Limited July 29, 2026 risk but also releases some amount of capital. So, all this is something that we will continue to do. We do not expect to raise Tier-1 capital for this current calendar year. Maybe towards the end of the fourth quarter of this financial year or maybe towards first quarter of next financial year, we might look at it. But again, that depends on how much capital we are able to conserve through all these methods. And in the forthcoming AGM, we would be putting up an enabling resolution for a Tier-1 capital of Rs.1,250 crores…but that is again largely an enabling provision. Last year also, we had a similar provision at the last AGM which was approved by the shareholders. But we were able to manage the capital, so we really did not raise. This year again, we will be coming up with enabling resolution. But the target would be to raise it either in the fourth quarter or first quarter, again depending on how we are able to conserve the remaining capital. Moderator:

The next question comes from the line of Deepak Poddar from Sapphire Capital. Please go ahead.

Deepak Poddar:

Yes, thank you very much, sir, for this opportunity. So, just wanted to understand, first up, I mean, for the full year, we are still targeting 1.2% kind of an ROA rate. So, are we still maintaining our exit ROA of 1.5% by 4Q that I think we have mentioned in the earlier calls as well?

P N Vasudevan:

Yes, so we had guided for a 1.2% for the full year and 1.5% exit for 4Q ROA. But, if you see our 1Q ROA is just a little bit less than 1.2%. And so it does look like our ROA for the full year should be more than our guided range of 1.2% ROA. So, we are also looking at a lot of the metrics which go to the ROA tree. And maybe by end of second quarter, we might come with a revised guideline. We believe that our actual ROA for the year should be better than the earlier guided figure. But, how much better and what is it likely ROA that we should expect for the full year, we should be able to come back to that maybe by end of second quarter.

Deepak Poddar:

Okay. Do we still maintain year-end ROA of 1.5?

P N Vasudevan:

I mean, that is what we have guided, definitely that we should be able to deliver, by end of second quarter, we will be able to say whether it can be better than that.

Deepak Poddar:

Okay. Anything on FY28 next year what sort of ROA we are looking at?

P N Vasudevan:

See, whatever the full year ROA that we will end up for current year, the next year should only be better than that, because all the metrics are looking good, the whole platform has really been laid out strongly over the last three, four years. So, whatever be the ROA that we end up this year, next year should be an improvement on top of that.

Deepak Poddar:

So, improvement over the exit ROA?

P N Vasudevan:

Not exit ROA. I am saying that whatever ROA we deliver for the full year, next year full year ROA should be definitely better than that.

Equitas Small Finance Bank Limited July 29, 2026 Deepak Poddar:

Got it. That is very helpful, sir. That would be it from my end. Thank you.

Moderator:

The next question comes from the line of Shailesh Kanani from Asian Market Securities. Please go ahead.

Shailesh Kanani:

Good morning, everyone and thanks for the opportunity. A couple of questions from my side. I wanted to check on the growth of gold loan book. It seems a little bit moderation has been there in this quarter-on-quarter basis. So, how should we think about this and what should be the year-end target for this book?

Suresh:

See, gold loan, we have already informed that we are expanding gold loan to liability branches. From the asset branches side, we are enhancing our distribution. So, we are closer to Rs. 1,000 crores now, on a full year basis, we intend to scale it up to Rs. 1,600 crores mark. So, that is how we are looking at it as we move forward. Of course, there are opportunities to further scale it up as we move forward with the distribution getting enhanced in the branches as well. So, we will come back on that maybe in the subsequent quarters as well as how it comes out.

Shailesh Kanani:

Any reasons for moderation during this quarter?

Suresh:

It is largely seasonal and some bit of network expansion what we have undergone is taking some more time. But otherwise, the month-on-month disbursements are healthy. So, we continue to do healthy numbers there.

Jagadesh J:

This is Jagadesh. So, on the asset part of the gold loans, we are yet to start off with our branch expansion. So, by Q2, we will come up with more branches and our plans of getting into close to some 120-branches will be done by Q4. So, we are able to see the upsurge in disbursements from Q2 onwards.

Shailesh Kanani:

Okay. Fair enough. And just to. repeat that number, 2600 Crore is the target for Gold Loan Book?

Suresh:

It’s 1,600 Crore.

Shailesh Kanani:

My second question was with respect to liability fee income. That growth on a year-on-year basis seems to be muted. So, any steps we are taking to boost that line item?

Murali Vaidyanathan:

In terms of product mix in insurance, we are now skewed towards term as well as traditional. And as we know, the commission structures are coming under scrutiny. We are putting a lot of guardrails in terms of focused on solutions based on suitability, and also, most importantly, the mix which should not be driven through revenue. So, top-line growth will happen and revenue will be a by-product of top-line. That is what we call it as BWRP. That is going to be our approach for this year. And in the coming quarter, we are going to enhance our health insurance proposition within the customer

Equitas Small Finance Bank Limited July 29, 2026 segment. So, it is a product of life, general and health. In the first quarter, it was skewed towards general and life. In the second quarter, we will be focused more on health penetration and life ticket size penetration. Shailesh Kanani:

Any update on the universal banking license?

P N Vasudevan:

On that question, we are looking at it internally. As of now, we have not put a timeline to apply to RBI. We have gone through the RBI guidelines. We have gone through the data of the bank. Technically, it looks like we are in compliance with the guideline requirements. That is what it appears to be for us. But we will be doing more analysis of that. We will take our time. We are not really in a hurry to file our application at the earliest. We will study the guidelines and the bank's position. We will have dialogues with RBI also. And then we will take that call as to when we should file. So, if you ask me a timeline by when we expect to file, we do not have the timeline at this point in time, but, we will come back to you shortly on that, but we are working on that project as of now.

Shailesh Kanani:

Okay, sir. Thanks a lot. Best of luck.

P N Vasudevan:

Thank you. Bye-bye.

Moderator:

The next question comes from the line of Ashwani Kumar Agarwalla from Edelweiss Mutual Fund. Please go ahead.

Ashwani K. Agarwalla:

Good morning, sir. Sir, can you explain what was the reason for your decline in NIMs, can you break it and the impact of the yield impact because of cost of funds?

Suresh:

So, if you look at it on a daily average basis, the yield has gone up by three to four bps on a QoQ basis. And the other side, on cost of funds, again on daily average basis, it has dropped by close to 12 bps. So, this has resulted in a NIM drop for the quarter on a sequential basis.

Ashwani K. Agarwalla:

So, you said your cost of funds also declined and yields also increased. So, your NIMs could -

Suresh:

Yield increase was around four bps on a daily average basis. So, the NIM drop is primarily contributed by the cost of funds increase.

Ashwani K. Agarwalla:

And how much did your cost of funds increase -- roughly 15, 16, 17 basis points?

Suresh:

Eleven basis points during the quarter.

Ashwani K. Agarwalla:

Okay. Do you hold any extra liquidity which can be deployed in the next quarter?

Equitas Small Finance Bank Limited July 29, 2026 Gopalakrishnan:

So, during the quarter, a lot of transactions which has been undertaken by the IBPC transactions and also we have availed some refinance. During the last few days of the quarter has contributed higher liquidity at the end of the quarter and we expect that to be consumed in the current quarter. We already saw a significant amount of consumption in the last few days and then this surplus liquidity will get consumed now.

Ashwani K. Agarwalla:

Okay. So, what was the drag in the margins caused by that liquidity?

Suresh:

Since it is on a daily average basis, the drag is very nominal.

Ashwani K. Agarwalla:

Where do you see the margins going forward -- is it likely to improve in the second quarter and for the entire year?

Suresh:

See, from a NIM point of view, currently we are at 7.24% or it will come down as we move forward, primarily attributed to the increase in cost of funds. So, maybe 7.1% levels is what we are looking at NIM on a daily average basis. So, that is the mark in the next two to three quarters we are looking at. Also, I would like to add one more thing is the LCR on a daily average basis, if you look at it, it is 142%. And so this 176% what we are putting in the presentation is on a quarter-end basis. So, relatively, we are comfortable in that liquidity point of view as well.

Ashwani K. Agarwalla:

NIMs is also declining because you are consuming capital. And on a spread basis, how much would be the decline?

Suresh:

So, yes, 7.24% will come down to around 7.1% NIM as we move forward.

Ashwani K. Agarwalla:

But what about spreads?

Suresh:

Spreads from a yield point of view and advances?

Ashwani K. Agarwalla:

Yields and advances minus cost of funds?

Suresh:

So, a combination is what I am saying. So, in yield marginal uptick is expected as we move forward, but largely, the drag will be from the cost of funds side.

Ashwani K. Agarwalla:

Okay, sir. Thank you.

Moderator:

The next question comes from the line of Param Subramanian from Investec. Please go ahead.

Param Subramanian:

Yes, hi. Thanks for taking my question and congratulations on the quarter. Sir, my question is on the deposits. So, if I look at the Elite book, as well as the SA growth, so it is still in, say, low single digits

Equitas Small Finance Bank Limited July 29, 2026 and you highlighted there will be some pickup through the year. So, where do we see these numbers going to broadly, if you can talk about? And what implication will that have for the cost of funds? Murali Vaidyanathan:

See, today, Elite book is standing at Rs. 18,475 crores. About 40% of the book comes from Elite. This is at a TRV level basis, which means SA plus TD what it has. So, earlier, we had only one proposition called Elite. Today, we have one at the lower side, Elite Lite for emerging affluent, and one we have created on the upper side called Artha, three months back. Now, Artha trajectory, we have already crossed 1,000 Artha and ATS is very, very healthy. So, we are seeing a trajectory of Elite customers migrating towards Artha and most importantly, sourcing Artha as a customer. And for our normal sourcing in most of the branches, we are using Elite Lite. So, our ambition is to do at least Rs.200 crores month-on-month on NTB acquisition, Rs.100 crores addition on the existing Elite portfolio on savings account. This is going to be our drive and direction all about. So, in a continued or a sustained basis, we target from House of Elite what we call 4,000 accounts, 2,000 accounts will come from Elite Lite, 1,500 accounts will come from Elite and 500 from Artha. So, we have a segmentation and product differentiation backed by RM as an approach to build this RV and SA.

Param Subramanian:

Okay, sir. So, will Elite, SA, retail TD to get to a double-digit growth by the end of the year?

Murali Vaidyanathan:

End of the year, definitely. This quarter itself, as we said, RTD, we are seeing a significant uptick.

Param Subramanian:

Okay, great to hear. And so you mentioned on the margins 7.24%, I think close to 7.1% through the year is that and that will be led by an uptick in cost of funds, that is what you are talking about?

Murali Vaidyanathan:

Yes.

Param Subramanian:

ROA improvement through the year, this 1.2 going to 1.5 by exit is mainly then offset coming through from credit cost decline and OPEX to assets, is it?

Suresh:

Yes, from Q1 to 4Q point of view if you look at it, there is potential on the fee income as well, because Q1 is sequentially a big quarter from a fee income, Q4 will be very strong in that perspective, and OPEX and credit cost all can be the drivers for that 1.5% exit.

Param Subramanian:

Okay. Very clear. In the last few quarters, we are seeing borrowings in the balance sheet, and I think it is refinance that is going up sharply. So, if you could talk about, say, the funding cost on the refinance and relative to your deposit cost, because that is incrementally helping your funding?

Gopalakrishnan:

So, the refinance, which we avail from the refinance agencies, all come with the benefit of a CRR, SLR exemption. So, from a cost of funds perspective compared to the deposits, it is marginally lower because of the refinance funds. In the deposit funds, added to the cost of funds plus CRR, there will be a higher cost. So, in the refinance, we see margin benefit coming out of that.

Equitas Small Finance Bank Limited July 29, 2026 Param Subramanian:

Okay. The effective cost will be better than say, 7.05% cost of funds you have? Okay. Thank you so much and congrats once again on the quarter.

Moderator:

The next question comes from the line of Ashlesh Sonje from Kotak Securities. Please go ahead.

Ashlesh Sonje:

Hi, team. Good morning. A few questions from my side. First one is on the slippages. If you can share a breakup of the Rs.360 crores gross slippages in the quarter between MFI and non-MFI? Similarly, if you can also break the Rs.160 crores provisions in the P&L this quarter between MFI and non-MFI? Third one, your CD ratio seems to be in a fairly comfortable place so is LCR. Can you tell me how much more you can stretch the CD ratio on the higher side? And fourth one is on the employee base. There has been a QoQ reduction here. If you can share the reason for that as well as tell us how much more employees you intend to add during the year or during the next two years and what proportion of them would be on the branch banking side versus on the asset side?

Jagadesh J:

Hi, this is Jagadesh. Regarding the gross slippages for the quarter, it is almost 3.45% which is Rs.397 crores. Microfinance is Rs.36 crores and non-microfinance is Rs.360 crores.

Ashlesh Sonje:

Breakup of the P&L provisions, CD ratio question and employee base question?

Suresh:

CD ratio point of view, we are at around 93% and we feel we will maintain this as we move forward and there is a potential for us to bring it marginally down as well during the coming quarters.

Mukund S. Barsagade:

Hi, this is Mukund here. The provision breakup for microfinance is Rs.34.73 crores and the non-MFI is Rs.125.93 crores totalling to Rs.160.63 crores.

Ashlesh Sonje:

Okay, understood. And on the employee base?

P N Vasudevan:

In employees, there was a marginal drop in Q1 compared to Q4, but that is largely because we have not added new branches, but, otherwise, for the rest of the year, we should see some increase in the frontline sales staff in the liabilities, in liabilities, we expect to add another maybe anywhere between 300 to 400 people, so that we should see as an increase going forward. On the assets side, marginally there may be an increase, but by and large, we do not expect an increase in the number of staff on the assets side. The rest of the bank, in terms of the HO, the rest of the functions, there may be marginal headcount increase, but it will not be anything significant. So, if you look at it overall, maybe we can assume a 500 headcount increase for the rest of the year, largely coming from the liabilities division.

Ashlesh Sonje:

Understood, sir. Just one follow-up question on the provision line. As on March, I believe we still had about Rs.45-46 crores in the stress sector provision for MFI outstanding on the balance sheet. How much of that is still left now?

Equitas Small Finance Bank Limited July 29, 2026 Mukund S. Barsagade:

Yes, it is roughly Rs.44 crores as of now.

Ashlesh Sonje:

Thank you, sir, for all your responses.

Moderator:

The next question comes from the line of Rajiv Mehta from YES Securities. Please go ahead.

Rajiv Mehta:

Yes, hi. Congratulations on good performance. Just continuing on the provision, of this Rs.160 crores provision in the quarter, we did Rs.200 crores of write-off, so, what was the write-off related provision in the quarter, was it Rs.20 crores, Rs.30 crores?

Mukund S. Barsagade:

Those write-offs were primarily 100% provided.

Rajiv Mehta:

Because they were MFI?

Mukund S. Barsagade:

Yes, MFI is Rs.143.8 crores and vehicle finance is Rs.24.21 crores primarily.

Rajiv Mehta:

Okay. But these are all almost 90%-100% provided. So, no impact?

Mukund S. Barsagade:

Yes.

Rajiv Mehta:

Okay, got it. From collections point of view, both MFI as well as non-MFI, how is July going, if you can share whether the X-bucket in MFI as well as non-MFI is stable versus June?

Jagadesh J:

Yes, it is almost stable. Not only July, even this quarter, we expect a similar kind of performance in microfinance, both in X-bucket as well as on the credit cost.

Rajiv Mehta:

This Rs.24 crores of remaining additional provision would get automatically consumed -

Jagadesh J:

Not Rs.24 crores, sorry to interrupt, it is Rs.44 crores.

Rajiv Mehta:

Still left Rs.44 crores?

Jagadesh J:

Yes.

Rajiv Mehta:

But I believe it was a very similar number as of March also.

Jagadesh J:

March is Rs.46 crores, now it is Rs.44 crores.

Rajiv Mehta:

Yes. So, this Rs.44 crores, how do you plan to consume it in the next two, three quarters?

P N Vasudevan:

See, this Rs.44 crores, Rs.46 crores, they have arrived at, we have some formula basis which we make this provision for standard assets in microfinance, which is basically that out of all standard

Equitas Small Finance Bank Limited July 29, 2026 assets of MFI, all accounts where leveraged more than Rs.2 lakhs by all the lenders or more than Rs.3 lakhs per borrower. So, we arrive at that number based on a credit bureau run that we do at the end of each quarter. And that amount we take it and we make a provision of 50% on that standard asset as this additional stress sector provision. That is how we do it. In fact, we started this last year when the MFI was under a lot of stress and over-leveraged clients were causing the problems of nonrepayments. That is when we started this process and we are continuing it as of now. How do we consume it going forward? It depends. I think the comfort has come in very strongly in terms of the MFI coming back to normal levels. So, we may watch it for maybe another one or two quarters and at the end of one or two more quarters if MFI continues to behave very well and we do not see any particular level of stress other than normal, then we might just reverse the whole standard asset provisioning. That is something that we may do maybe at the end of one or two quarters or maybe three quarters. It all depends on how we perceive the MFI industry to come back to normalcy. Rajiv Mehta:

Correct. So, this is an ongoing policy, right? So, it will always be subject to a review every quarter depending on the leverage at the customer level, right?

P N Vasudevan:

That is right. In fact, I can tell you the portfolio which is coming under this over-leveraged position is Rs.88 crores as of June and it was Rs.92 crores as of March.

Rajiv Mehta:

Okay. It has come down? Got it. One thing on this net slippage ratio for the non-MFI, obviously, seasonally it has gone up. But just to understand in the right way, this net slippage ratio of non-MFI portfolio, would it be among the best in the last four or five years what you delivered in Q1?

Jagadesh J:

Yes. It is not only best among the Q1 of the last financial year and also barring Q4, even between Q2 and Q3 of the last financial year, this particular quarter, we felt better in terms of the net slippage even in the non-microfinance.

Rajiv Mehta:

So, you are very comfortable with the kind of seasonal movement we saw in all these non-MFI products?

Jagadesh J:

Yes.

Rajiv Mehta:

Okay. Yes, I think that is all from my side. Best of luck.

Moderator:

The next question comes from the line of Jeet Suchak from Ambit Capital. Please go ahead.

Jeet Suchak:

Hi. Good morning. So, in the slide #6, we see different yields on MFI and non-MFI. In non-MFI, we see a 4-basis points uptick this quarter while around 40-basis points decline YoY. So, what explains the YOY decline -- is it because of majorly from mix change or the rate cut, how much was from the rate cut and how much from the mix change?

Equitas Small Finance Bank Limited July 29, 2026 Suresh:

So, Jeet, largely it is from a mixed point of view. So, that is the resultant decline in terms of on a YoY basis.

Jeet Suchak:

Okay. So, like the mixed change incremental growth will be from the current mix that happened in YoY or how do you see this going forward?

Suresh:

See, from overall advances point of view, if you look at it, DA is something which is going to come down, and NBFC funding as a portfolio, what we have is something selective we will do basis the appetite. Otherwise, the rest of the products will continue to grow at the intended growth of let us say 20%-plus. So, that is the mark we have. So, to that extent, there will not be a change in the rest of the products. Okay.

Jeet Suchak:

So, around from 13% MFI mix to 10%, do you see any meaningful decline in yields?

Suresh:

No, there will not be any meaningful decline in yields on that side because the DA what we have is around 2.5% of this 13%. So, that is largely at much lower yields. So, there should not be any meaningful decline there. In fact, what we anticipate is a marginal uptick on the yield as we move forward.

Jeet Suchak:

Okay. That is it from my side.

Moderator:

The next question comes from the line of Saumil Shah from Paras Investments. Please go ahead.

Saumil Shah:

Yes, hi, team. Thanks for the opportunity. So, my question is on the credit cost side. So, for this quarter, it was at 1.37%. So, where do you see this number settling in this year, any credit cost guidance for this year?

Jagadesh J:

We will be in a steady state or we will show a marginal improvement or reduction going forward.

Saumil Shah:

Okay. So, we are looking at below 1.37% on a full year basis?

Jagadesh J:

Yes.

Saumil Shah:

Okay. And one question is on the ROA front. So, basically, you have alluded to the previous participant that 1.2% ROA for this quarter, moves to 1.5% by Q4. Typically, June quarter being the weakest quarter. So, how shall we look at the coming quarter? This 1.2% gradually increases to 1.3% and then move towards 1.5%, any thoughts on this?

Suresh:

Yes, there should be a gradual improvement on this. However, we said that post Q2, we will be in a position to guide you in terms of the full year ROA. But, otherwise, like you said, there will be a gradual improvement as we move forward with an exit of 1.5% by 4Q.

Equitas Small Finance Bank Limited July 29, 2026 Saumil Shah:

Correct. So, QoQ, we are seeing an improvement over Q1, right?

Suresh:

Yes.

Saumil Shah:

Okay. That is it from my side. Thank you and all the best.

Moderator:

Thank you. We will take this as the last question. And now, I would like to hand the conference over to Mr. P N Vasudevan for closing comments. Thank you and over to you, sir.

P N Vasudevan:

Thank you all of you for joining in and asking us questions and enabling us to answer your queries. Thank you and looking forward to the next quarter interaction with you again. Bye-bye.

Moderator:

On behalf of Equitas Small Finance Bank Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.