AU Small Finance Bank - Q1 FY 2023 Review

AU Small Finance Bank limited reported net revenue of ₹1,82,019.72 Lakhs for the quarter ended June 30, 2022, compared to ₹1,35,349 lakhs for June 30, 2021. Profit After Tax was ₹26,786.63 lakhs for the quarter ended June 30, 2022, compared to ₹20,319.79 lakhs during the corresponding quarter of the previous year, respectively.

AU Small Finance Bank - Investment Summary

Overview

• As of June 30, 2022, AU Small Finance Bank had 953 banking touchpoints and employees around 28,8883 people to serve 30.7 lakh customers in 20 states and 2 union territories.

• Bank has been assigned AA+ and A1+ for the long-term and short-term loans by Crisil Rating Agency.

• Allotment of 8,48,620 equity shares of the face value of ₹10 each to eligible employees under the stock option scheme.

AU Small Finance Bank - Quarterly Summary

Business

• AU Small Finance Bank Limited was originally incorporated as L.N. Finco Gems Private Limited on 10 January 1996.

• In the year 2000, the company received a certificate of registration under section 45IA of the RBI Act to carry on the business of non-banking financial institutions without accepting public deposits.

• In 2003, developed a strategic relationship with HDFC Bank and went on to become the only ‘channel business partner’ for HDFC Bank in Rajasthan.

• Between 2007-08, the company started offering secured business loans and Motilal Oswal Private Equity Advisors Private Limited invested in the company's first private equity capital.

• Received ‘In-Principal approval’ for small finance bank from RBI on September 16, 2015.

• The bank received its license on December 20, 2016.

• The bank got listed on the NSE and BSE on 10 July 2017.

• During FY 2021-22, the bank organized itself into 10 Strategic Business Units:

  • Branch Banking:

    • The cornerstone of the bank's banking franchise is branch banking.

    • It is fueled by the growth of the bank's branch network, the increasing contribution of retail deposits to the deposit portfolio, the emphasis on an optimum CASA mix, and the creation of an engaged client base.

  • Wheel:

    • The most seasoned book in the portfolio and one of the bank's main products is the auto loan.

    • The bank extends financing for both personal and business usage automobiles and has one of the broadest product lines in the industry.

  • Secured Business Loans (SBL):

    • SBL is one of the bank’s core offerings which cater to various business requirements of Micro & Small segments of the economy

  • Home Loans:

    • The objective is to provide a comprehensive range of home loan products to accommodate every home buyer’s loan needs, which focuses on an affordable housing society.

  • Commercial Banking:

    • To offer MSMEs, NBFCs, and real estate developers comprehensive banking services.

    • The bank provides a wide range of products, such as working capital, term loan, trade finance, and cash management solutions, to fulfill the asset and liability needs of customers.

  • Digital Banking:

    • To provide products and services like Personal loans, Credit Card, Insurance & Investments, Lending against digital merchant data, Mobile Banking, Net Banking, etc.

  • Credit Card:

    • The objective is to make credit available to all. The customers range from salaried employees to new to bank/first-time credit card holders.

  • Merchant Solution Group:

    • This SBU caters to all banking and financial needs of the MSME segment.

  • Treasury, DCM, and Wholesale Liability:

    • Asset liability management (ALM), efficient fund planning and positioning, day-to-day liquidity and fund management, managing statutory reserves following statutory guidelines, and prudently handling investments and trading portfolios following regulatory and internal policy frameworks are the primary responsibilities of the bank's treasury.

  • Financial and Digital Inclusion:

    • Building a society where every person is financially included in a way that improves livelihoods and promotes sustainable development is the goal of the Financial and Digital Inclusion SBU.

    • Financial inclusion is the process of ensuring transparent, affordable access to and use of high-quality financial services.

    • The main tool for facilitating reliable service delivery is digitization. Digital financial inclusion is the use of digital solutions to advance financial inclusion.

• Out of the total revenue, 15% has been generated from Treasury operations, 6% from wholesale Banking, 79% from Retail Banking, and 1% from others in FY 2022 compared to 27%, 6%, 67%, and 1% in FY 2021, respectively.

AU Small Finance Bank - Revenue Trend

AU Small Finance Bank - SWOT ANALYSIS

• Strength:

  • Experienced Management.

  • Strong Financial Position.

  • Building a strong retail Franchise Bank.

  • Healthy customer base.

• Weakness:

  • Interest Rate risk.

  • Promoter shareholding is low.

  • Geographical Concentration risk.

  • Expensive replacement of current professionals.

• Opportunities:

  • Advancement in Technology.

  • Growth Potential.

  • Branch Expansion.

• Threats:

  • Increasing competition.

  • Ongoing uneven circumstances globally (e.g., Inflation).

  • Regulatory requirements.

  • Retention of Key Management Personnel.

AU Small Finance Bank - Ratio Analysis

AU Small Finance Bank - Financial Overview

AU Small Finance Bank - Profit and Loss Statement (₹ in crores)