Equitas Small Finance Bank IPO

Dates, Price band, Lot size, Risks, Review and broker recommendations etc.

Equitas – Company Info

Equitas

Equitas Small Finance Bank is a small finance bank founded in 2007 by Equitas as a microfinance lender, with headquarters in Chennai, India. After receiving license from the Reserve Bank of India (RBI) on 30 June 2016, Equitas began banking on 5 September 2016 as a subsidiary of holding company Equitas Holdings Ltd. With effect from 4 February 2017, Equitas became a scheduled bank. However, the company missed on RBI’s mandate of listing within 3 years of commencement of its operations. Review from the Securities and Exchange Board of India and RBI is awaited.

The bank planned to build a network of 412 branches located in 11 Indian states by the end of fiscal year 2016-17. However, the bank is heavily committed to technology, with 83% of transactions occurring online as of July 2017. This includes the bank providing an RFID sticker to pay road tolls automatically, with settlements occurring digitally.

Competitive Strengths

  • Equitas SFB is a customer-centric organization with a deep understanding of the unserved and underserved customer segments
  • It is among the largest SFBs in India with a well-diversified asset portfolio
  • A strong retail liability portfolio with a strategic distribution network
  • Customized credit assessment procedures for effective credit risk management
  • Equitas leverages technology to drive operating procedures
  • Professional management, experienced leadership, and trained employee base

Company Strategy

  1. Leveraging on its existing network for deepening penetration and driving operational efficiency.
  2. Strengthen liability franchise and focus on increasing its retail base to further improve cost of funds.
  3. Leverage data for analytics to drive operational efficiency.
  4. Continue to focus on digital products and technology to grow operations.
  5. Continue to diversify product offerings and leverage cross-selling opportunities.
  6. Increasing focus on non-interest income sources.

IPO Fully SUBSCRIBED – See details below

Proceeds from the IPO will be used to:

  • Follow the Reserve Bank of India’s guidelines for banks, which mandates them to list equity shares on the stock exchanges within three years from the date of commencement of business.
  • Augment the Bank’s Tier I capital base
  • Support future capital requirements

Equitas Infrastructure IPO Dashboard

Issue Details
TypeValue
Issue Size₹517.6 Cr.
Face Value₹10/- per Equity Share
IPO Price₹32 – ₹33
Lot Size450
Minimum Lots1
Maximum Lots13
Lot Size and Price
LotsSharesAmount
1450₹14,850
135850₹193,050
Key Dates
Date TypeDate
Bid Open20/10/2020
Bid Close22/10/2020
Allotment Finalization27/10/2020
Initiation of Refunds28/10/2020
Credit of Shares29/10/2020
Listing Date02/11/2020
Promoter Holding
HoldingPercentage
Pre-Issue95.49%
Post-Issue– %
Investor Quota and Shares Offered
Investor TypeQuotaShares on Offer
QIB50%2,79,75,001
NII15%2,14,87,500
RII (Retail)35%5,01,37,500
Total100%11,58,50,001
Day-Wise Subscription Status
DayDay 1Day 2Day 3
QIB0.00x0.05x3.91x
NII0.03x0.05x0.22x
RII (Retail)0.85x1.42x2.08x
Employee0.45x0.97x1.84x
Shareholder0.14x0.24x0.42x
Total0.39x0.67x1.95x

Brokerage Recommendations

Emkay Global Financial Services – Subscribe

Emkay Global Financial Services recommended investors to subscribe to the IPO. The brokerage said it has a ‘buy’ rating on the holding company Equitas Holdings Ltd with target price of Rs 64 for its superior asset diversification, reasonable liability profile, better management pedigree, healthy return ratios and reasonable valuations.

KR Choskey – Subscribe

KR Choksey has a long-term positive view on the stock, and recommended investors to subscribe to the issue. “Strong fundamental performance and adequate liquidity position provides an opportunity to grow business in future,” the brokerage said, adding that the bank is being issued at valuation of around 1.23 times P/BV at upper price band of Rs 33 as on Q1FY21.

Quantam – Subscribe

According to Quantum Securities, as the SME/MFI businesses face various challenges at operating level in wake of current pandemic and the interest waiver issue for which PIL (public interest litigation) has been filed in the Supreme Court (SC), listing gains look difficult. “So based on expectation of improvement in performance from FY22E onwards, we recommend investors to ‘Subscribe’ to the issue from a long term perspective,”

Angel Broking – Neutral

Angel Broking pointed that at the upper end of the price band, it demands adjusted P/BV of 1.26 times post considering fresh issue. “Though the bank has a diversified loan book and the best CASA ratio among SFBs, the return ratios are subdued with GNPA above 2.5 per cent for last 3 years. Our concern for Equitas SFB is fresh formation of bad loans from moratorium book that would keep provisions high and return ratios compressed,” said Jaikishan Parmar, senior equity research analyst at Angel.

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