Kotak Securities has issued positive ratings for Sobha and Equitas Small Finance Bank, highlighting strong sales growth and improved loan quality. Investors are tracking Sobha’s project pipeline and Equitas SFB’s reduced exposure to microfinance risks.
Kotak Securities has released fresh outlooks on Sobha and Equitas Small Finance Bank, citing strong operational growth and improved asset quality. For Sobha, the brokerage maintained an 'ADD' rating, driven by record pre-sales and a significant pipeline of future project launches. Meanwhile, Equitas Small Finance Bank received a 'BUY' rating as the lender shifts away from its past reliance on microfinance business.
Sobha Operational Performance
Sobha, a prominent real estate developer, recorded pre-sales of ₹8,140 crore for FY26, representing a 30% increase compared to the previous year. This growth momentum continued into the first quarter of FY27, with reported pre-sales of approximately ₹3,660 crore, a 76% jump on a year-on-year basis. The company has also seen a 62% increase in sales volume, reaching 23.4 lakh square feet.
The firm currently maintains a pipeline of 13 residential projects covering 2 crore square feet scheduled for launch over the next four to six quarters. From an investor perspective, the company’s ability to generate cash flow from these projects remains a critical monitorable. Kotak Securities estimates potential cash flows from ongoing and completed projects at ₹9,560 crore, with the stock currently valued at roughly 7.4x FY27 estimated EV/EBITDA.
Equitas SFB Loan Portfolio Shift
Equitas Small Finance Bank is currently pivoting its business strategy by reducing its microfinance segment, which now accounts for 10-12% of its total loan mix. This move is significant as the bank previously navigated stress within the microfinance cycle during FY2025-26. Current data indicates a recovery in collection efficiency, which has reached 99.7%.
The bank’s lending model is diversified across small business loans, vehicle finance, and housing finance, with a goal of achieving a steady-state return on assets of 1.5% by FY2031. Management aims to maintain credit costs between 1.25% and 1.50% while keeping the cost-to-income ratio below 60%. Trading at 1.2-1.4x forward book value, the bank is attempting to improve its return on equity as it scales its non-microfinance business. Investors will likely watch whether the bank can maintain its collection performance and grow its advances at the guided 21% compound annual growth rate over the coming years.