Shares in AU Small Finance Bank hit a record high of Rs 1,441 and gained 4 percent on the BSE during Tuesday in an otherwise subdued market after the private sector lender said the bank’s board will meet next week to review a bonus issue proposal. The stock surpassed its previous high of Rs 1,428 reached on April 13, 2022.
“A meeting of the Bank’s Board of Directors will be held on Monday, April 25, 2022, which will resume on Tuesday, April 26, 2022, to consider the proposal to issue Bonus Shares, subject to the necessary approvals,” AU Small Finance Bank said in a stock exchange application.
The Board will also review the Bank’s audited financial results for the quarter and year ended March 31, 2022; and recommends, if appropriate, a dividend on shares for the year ended March 31, 2022, the bank said.
AU Small Finance Bank outperformed the market, rising 24 percent over the past month, compared with a 1 percent decline in the S&P BSE Sensex.
Last week the rating agency CARE Ratings assigned a rating of CARE AA; Stable (Double A; Outlook: Stable) versus the bank’s long-term debt (Tier II bonds). The bank’s short-term certificate of deposit rating was confirmed at CARE Al+ (A One Plus).
The ratings assigned to the debt securities of AU Small Finance Bank Limited take into account the continued momentum of business and size growth following the transformation into a Small Finance Bank (SFB) in April 2017, the establishment of a deposit franchise along with a sizeable flow of Account Savings Account (CASA) deposits and a moderate diversified portfolio of advances with a largely secured loan portfolio, according to CARE Ratings.
Under Reserve Bank of India (RBI) Policies, AU Small Finance Bank is eligible to apply for conversion to Universal Bank or following a review, RBI may expand its scope of operations after a satisfactory track record of five years as an SFB.
However, the conversion would be subject to the approval of RBI. While the bank would benefit from the transformation to a universal bank, which would see the minimum threshold for lending to priority sectors lowered from 75 percent to 40 percent, the bank’s asset strategy would remain broadly consistent with the current asset profile, and CARE Ratings is doing so do not expect the bank to have significant exposure to large corporate loans over the medium term, even in the event of a transformation into a universal bank.
outlook: Cautiously optimistic
Resistance: Rs 1,463
support: Rs 1,289
AU Small Finance Bank stock has been in an uptrend since March 31. For the month of April so far, the stock is up around 11 percent through Monday, versus a 2.3 percent decline in the benchmark S&P BSE Sensex.
However, after rallying in one direction, the stock is likely to take a breather around the Rs.1,463 level, which is the upper end of the Bollinger Band. If the stock breaks up this level it can reach Rs 1,535 according to Fibonnaci charts. Its immediate trendline support stands at Rs 1,289.
The price-to-movement averages are suggesting optimism in the stock as the 20-day moving average (DMA), 50-DMA and 100-DMA are showing positive crossovers.
(With contributions by Nikita Vashisht)