The brokerage has downgraded its rating on the stock to “sell” from “add” and has raised its target price from ₹650 per share to ₹700 apiece, implying a downside of nearly 15% from its previous closing price on Friday.
It said that while challenges in unsecured businesses have hurt the lender’s profitability in the financial year 2025, those issues are expected to get sorted in the ongoing fiscal.
If macro environment turns favourable, AU Small Finance Bank can deliver healthy business growth ahead of peer banks, the brokerage said.
However, the recent stock price rally has made risk-reward proposition less attractive, it added.
Kotak Institutional Equities said it prefers to play cyclical recovery trade through other stocks where valuation is relatively inexpensive.
Last week, the lender said it partnered with the Life Insurance Corporation of India (LIC) to distribute LIC’s life insurance products across its network. The collaboration aims to improve access to life insurance among underserved and unserved populations across India.
AU Small Finance Bank reported a 10.7% sequential gain in its total deposits in the fourth quarter to ₹1.24 lakh crore from ₹1.12 lakh crore. The same was 27.2% more than the previous year’s ₹97,704 crore.
The lender’s current and savings account (CASA) deposits increased 5.4% to ₹36,250 crore from the December quarter’s ₹34,492 crore. It was also up 15.2% 4 up from the previous year’s ₹31,456 crore.
The CASA ratio came in at 29.2% compared to the previous quarter’s 30.6%. It was 32.2% in the year-ago period.
Of the 34 analysts that have coverage on the stock, 23 have a “buy” rating, six have a “hold” rating and five have a “sell” rating.
AU Small Finance Bank ended the previous session 0.75% lower. The stock has gained 44.57% this year, so far.
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