AU Small Finance Bank – Long-Term Investor Report (FY2012–FY2026E) 📅

Lesson 192/228 | Study Time: 15 Min

Course: Top Quality Companies

AU Small Finance Bank – Long-Term Investor Report (FY2012–FY2026E)

📅 CMP: ₹727 | 📈 Market Cap: Mid-to-Large Cap Banking Play | Portfolio Weightage: ~1.8% from 2%

Fairvalue:

https://docs.google.com/spreadsheets/d/e/2PACX-1vRg1tSKFe-u3gKrsjyojpraa0BgCp8uc91CDC5EW5wLCHb_RJ8_6sbNVHNBNtQ6Ww/pubhtml?gid=69417233&single=true

1. Company Overview

AU Small Finance Bank (AUBANK), headquartered in Jaipur, is one of India’s fastest-growing private banks, transforming from a vehicle finance company to a full-fledged small finance bank in 2017. It has carved a niche in retail-focused lending, particularly in semi-urban and rural India, and is now expanding into digital-first offerings. The bank’s core strengths include a strong deposit franchise, diversified asset book, and focus on underserved markets.

2. Industry & Growth Drivers

The Indian banking sector is undergoing a structural growth phase driven by:

Credit Growth: 14–16% CAGR industry-wide, led by retail and SME lending.
Financial Inclusion: Government-backed schemes (Jan Dhan, PM SVANidhi) expanding formal credit access.
Digital Banking: Increasing adoption of UPI, mobile banking, and fintech partnerships.
Private Bank Advantage: Better asset quality, higher ROE, and capital efficiency compared to PSU peers.

Outlook: AUBANK, with its retail focus and strong Tier-2/3 city penetration, is well-positioned to ride the credit growth wave while expanding into new segments.

3. Historical Financial Performance (FY2012–FY2026E)

Year	Advances (₹ Cr)	Total Income (₹ Cr)	Net Profit (₹ Cr)	NPM %	GNPA %
FY2012	—	249	50	20.1%	—
FY2016		1010	212	21.0%	—
FY2018	13,312	2,155	292	13.5%	2.0%
FY2020	26,992	4,992	675	13.5%	1.7%
FY2022	46,095	6,915	1,130	16.3%	2.0%
FY2024	73,162	12,300	1,535	12.5%	1.7%
FY2025	1,07,092	18,590	2,106	11.3%	2.3%
FY2026E	1,28,510	23,238	2,463	10.6%	2.47%

Key Observations:
✅ Advances grew at 35% CAGR (7-year) and 32% CAGR (3-year).
✅ Revenue outpaced profit growth in recent years, driven by high loan book expansion.
⚠️ NPM has compressed from 16–21% historically to ~11% recently due to their transition from MFI to SFB. .
⚠️ GNPA has risen slightly from 1.7% (FY2023) to 2.47% (FY2026E).

4. Valuation History – PE & PBV Trends

Year	Low P/E	High P/E	Low PBV	High PBV
FY2018	50	74	6.2	9.3
FY2020	21	55	3.3	8.5
FY2023	25	34	3.3	4.4
FY2025	17	27	2.1	3.3
FY2026E	17	29	2.2	3.6

📌 Current Multiples: PE ~22x FY26E EPS, PBV ~2.8x FY26E BV — Valuation in mid-range historically.

5. Latest Q1 FY26 Snapshot

Revenue: ₹5,189 Cr (+21.3% YoY)
Net Profit: ₹581 Cr (+15.5% YoY)
GNPA: 2.28% (vs 1.67% YoY)
NIMs & Margins: NPM down to 11.2% (-56 bps YoY)
Cost Growth: +22.2% YoY, with provisions rising sharply (+88.3%).

6. Growth Estimates & Price Projections

Year	Revenue (₹ Cr)	Profit (₹ Cr)	EPS	Low Price Range	Fair Value	High Price Range
FY2026E	23,238	2,463	33.1	563	845	1,127
FY2030E	56,732	7,331	99	1,676	2,515	3,353
FY2035E	1,14,109	14,745	198	3,372	5,058	6,744

7. Risks & Rewards – Long Term View

Positives:
✔ Strong advances growth with retail dominance.
✔ Expanding deposit base and geographic footprint.
✔ Consistent PE re-rating potential as bank matures.

Risks:
⚠ NPM compression due to higher provisions and rising costs.
⚠ Slight uptick in GNPA needs close monitoring.
⚠ Valuation premium demands continued high growth to sustain.

Reward Potential:
If the bank sustains 20–25% credit growth with GNPA under 2.5%, EPS could triple by FY2035 — implying 3x–5x price appreciation potential in the next decade.

8. Conclusion for Investors

AU Small Finance Bank offers high-growth banking exposure with a proven track record in retail credit and financial inclusion. While near-term margins are under pressure, long-term potential remains strong if asset quality stabilizes. Suitable for aggressive long-term portfolios with a 10+ year view, ideally accumulated during valuation dips.

📢 Disclosure

This report is for educational purposes and not investment advice. Investors should perform independent research before making any investment decisions.

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Piyush Patel

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