InvestorQ : I am holding small quantity of shares in Equitas. Should I continue to hold the shares or shift out?
Rashi Mehra made post

I am holding small quantity of shares in Equitas. Should I continue to hold the shares or shift out?

Answer
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vidhya Laxmi answered.
1 year ago


The company just announced its quarterly results for the March quarter. Its profits fell from Rs.2.15 crore to just Rs.84 lakhs. However, this is more due to an exceptional debit of Rs.4.68 crore that the company took as impairment of investment in a subsidiary. The total revenues for the quarter were also down to Rs.5.33 crore in the quarter. Effectively, the impairment of its investment in the subsidiary is nearly equal to a full quarter’s sales revenues knocked off, which does not speak too well about the risk management standards within the company. Gross NPAs stood lower at 2.52% but that may not be too relevant if you consider the impairment that the company has taken.

With low EPS, the P/E may not be too relevant. However, this stock had tanked during the liquidity crisis of September last year and that risk still remains. This business of micro financing is likely to be under pressure due to higher cost of funds. I suggest you to exit the stock for now.


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K V RAO answered.
1 year ago


Equitas, as you know, is a small finance bank. Bank stocks have a limited gains potential but have huge scope for losses. New banks like Equitas face Competition from all players in the financial sector. In fact, I strongly feel financial stocks can be avoided and surplus funds can be diverted to other stocks where there is lots of scope for appreciation.