Shares of Equitas Small Finance Bank crashed nearly 12% during Friday’s intraday trading session, extending their losses for the second consecutive session. The sharp sell-off came despite the bank reporting a strong set of Q2 results for the second quarter of FY27.
The Chennai-headquartered small finance bank reported a multifold increase in its net profit to ₹218.03 crore in the second quarter of FY27 against ₹24.13 crore reported in the year ago period.
However, Equitas SFB’s long-time CEO PN Vasudevan announced his resignation amid conflict of interest concerns. As the stock crashes 12%, is it the best time for investor to purchase the stock?
Why is Equitas SFB stock falling today?
The second consecutive day of crash in the small finance bank stock has come as the sudden leadership change continues to spook investors. The bank, on Thursday informed about Vasudevan’s exit amid conflict of interest concerns as his daughter runs a non-banking finance company.
Why did Vasudevan resign as Equitas SFB CEO?
Vasudevan has led the Equitas SFB as managing director and CEO for over a decade. Over the past few years, investors had repeatedly raised the issue of conflict of interest and it was weiging on the stock performance too, stated Vasudevan in his resignation letter.
He had led the bank since it started off as a microfinance institution in 2007 and oversaw its conversion into a small finance bank in 2016. With the conversion into SFB, Equitas is also eligible to provide basic banking and credit services to underserved segments.
All about Vasudevan’s conflict of interest concerns
Vasudevan’s daughter, Varshini Vasudevan Pathangi, founded Unico Housing Finance, which is an unlisted non-banking finance company. Vasudevan had highlighted in his resignation letter that the arrangement was disclosed to the board and the Reserve Bank of India, and there was no ‘conflict of interest’.
“Sometimes perceptions are stronger than reality,” Vasudevan said, adding that investors had told him the “overhang” was causing the shares to underperform.
Equitas SFB share price falls 28% in 2 weeks – Time to buy?
The bank stock has declined nearly 28% over the past two weeks, but brokerage Motilal Oswal Financial Services Limited (MOFSL) remains bullish on Equitas SFB stock due to its steady performance in Q2FY27 and positive growth outlook.
The bank reported a steady quarter, with healthy earnings supported by higher other income and lower provisions, despite a PPoP miss. “The impending MD & CEO transition remains a key monitorable, although management expects no disruption to business continuity,” stated the brokerage in its report, while maintaining ‘Buy’ rating for the stock.
Equitas SFB share price target
MOFSL maintained a ‘Buy’ rating and maintained a target price of ₹75 per share. “We increase our earnings estimates by 8.0%/2.5% in FY27/FY28 and estimate RoA/RoE of 1.3%/14.8% by FY28E. Reiterate BUY with a revised TP of INR75 (1.2x FY28E ABV).”
Equitas Small Finance Bank share price trend
The stock was trading 11.77% lower at ₹50.36 per share on BSE with a market capitalisation of ₹5,761.85 crore. Its share price value has declined 28% in two weeks, 30.69% in one month, and 15% in one year.
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