Indias Equitas Small Finance Bank Lists At 6% Below Issue Price
The promoter selling shareholder will be entitled to the proceeds from the offer for sale (OFS).
Ahead of the issue, Emkay Global Financial Services said that the IPO pricing, too, has been reasonable, valuing the bank at 1.3 times price-to-book ratio, compared with close peer Ujjivan Small Finance Bank trading at 1.8 times P/ABV TTM. “Equitas Small Finance Bank is well capitalized with capital adequacy ratio (CAR) at 21.6%, including CET 1 at 20.6%. After the fresh capital infusion, it will improve to 24%,” it said.
Post the IPO, promoter Equitas Holding stake will potentially fall to 82%, which will have to be pruned further to 40% by September 2021, 30% by September 2026 and to 26% by September 2028, calling for continued dilution.
“However, management has indicated that it would seek permission to do away with the holding company structure on completion of five years as a bank or may look at OFS/M&A as the options to reduce promoter stake to 40% and below, and also apply for a universal banking licence at an appropriate time,” analysts at Emkay Global Financial Services said.
Equitas Small Finance Bank is the largest small finance bank in India in terms of number of banking outlets, and the second-largest in India in terms of assets under management and total deposits in financial year 2019. Its products include small business loans, housing loans, and agriculture loans, vehicle loans, and MSE loan. On the liability side, it offers current accounts, salary accounts, savings accounts, and a variety of deposit accounts to their clients.
In addition, it also provides non-credit offerings comprising ATM-cum-debit cards, third party insurance, mutual fund products, and issuance of FASTags.
Its gross advances were at Rs15,572.91 crore as of 30 June, of which secured advances constituted 75.75% by the quarter. Their deposits grew at a CAGR of 38.75% from Rs5,603.97 crore as of March 2018 to Rs10,788.41 crore as of 31 March, 2020.
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