Introduction

In this Webinar, the speaker has discussed the following.

• Understanding Current Banking Sector Landscape in India
• Assumptions for Revenue Drivers
• Balance Sheet Analysis
• Valuation of AU Small Finance Bank
• Comparison of Banks with Small Finance Banks - Key Numbers and Metrics
• Relative Valuation using the Multiples

Objective

Banks play a vital role in the Economy's progress. And the importance of Bank Credit in these difficult times is even more crucial and critical. With MSME and Small Retail Clients struggling, Small Finance Banks will play a crucial role in India's growth future. This segment definitely has a lot in store when comes to analysis.

Small Finance Banks were introduced by the RBI as a concept to improve financial inclusion in India.

1) 60% of India’s population is rural, contributing nearly 47% of India’s GDP. However, Rural Credit proportion is only 10% of the total Credit.

2) 8 out of the 10 entities that got a Small Finance Bank License were Micro Finance Institutions. The microfinance business thus dominates the advances for these SFBs

3) SFBs are supposed to focus on small ticket size loans – at least 50% of the loan book needs to be loans lower than Rs 25 lakhs

4) AU, Equitas and Ujjivan are the 3 largest SFBs based on advances.

5) Deposit base of SFBs has tripled between FY18 and FY20

As India increases its Financial Inclusion, Small Finance Banks are an interesting space to watch.