The 520 crore IPO of Equitas Small Finance Bank, which opened for membership, was bought in 0.51 times. The subscription will close on October 22. Chennai-based Equitas Small Finance Bank gives credit to unserved and underserved sections of the economy and its portfolio incorporates agri-loans, housing loans, LAP, micro-lending, and vehicle loans. Ahead of the IPO, Equitas Small Finance Bank raised ₹139.68 crores from 35 anchor investors.
Equitas Small Finance Bank initiated operations as a Small Finance Bank(SFB) in 2016 after receipt of the RBI’s final approval. Before that, the organization was working as an NBFC offering vehicles fund and MSE finance business as a completely claimed subsidiary of promoter Equitas Holdings Limited. Equitas Small Finance Bank’s IPO includes a fresh issue of 85 million shares and an offer for sale of 72 million shares fundamentally to meet the RBI’s listing norms. After the IPO, the stake of Equitas Holdings Limited, the holding organization of Equitas Small Finance Bank, will fall to about 82%.
Bids can be made for at least 450 equity shares and in multiples of 450 equity shares from that point. KFin Technologies Private Limited is the registrar of the issue and will oversee share allocation and refund. JM Financial Limited, Edelweiss Financial Services Limited, IIFL Securities Limited are the book running lead managers to the offer.
Expected share allocation and listing dates
Shares of Equitas Small Finance Bank are relied upon to get listed on November 2. The share allocation in Equitas Small Finance Bank IPO is probably going to get concluded on October 27. A segment of the issue (about 10%) is reserved for this category but to qualify for this category you have to hold at least one portion of Equitas Holdings as on the RHP filing date i.e., October 11. As per RBI standards, the promoter of a Small Finance Bank must decrease their shareholdings in the bank to 40% from five years of operations. Equitas Small Finance Bank will complete its five years of operations in September 2021.
The management has shown that two courses are under consideration for the reduction of Equitas Holdings stake in the bank: merger and acquisition and block sale of shares by the holding organization. It has likewise said Equitas Small Finance Bank may likewise additionally apply for a universal banking license at an appropriate time.
The net profit of Equitas Small Finance Bank increased to ₹243 crores in FY20, from ₹210 crores in FY19. Net income rose to 1,777 crores in FY20.
Equitas has rightfully reduced its portfolio concentration in microfinance to 23% from 46% in FY17, given the risks and volatility associated with this business, while it has well-diversified into non-MFI loans encompassing vehicle, housing, and SME segments being the key drivers of growth. The bank has also now ventured into the secure gold loan business. However, it also needs to work toward geographic diversification given the sizeable exposure to its home state,” Emkay Global said in a note.