Stocks

Equitas SFB fixes IPO price ₹32-33; eyes NBFC/HFC

Our Bureau Mumbai | Updated on October 15, 2020 Published on October 15, 2020

Equitas Small Finance Bank (ESFB) will try to takeover either a non-banking finance company (NBFC) or a housing finance company (HFC) to bring down promoter Equitas Holdings Ltd’s (EHL) shareholding in the Bank and also apply for a universal banking license by September 2021, according to PN Vasudevan, MD & CEO

EHL’s shareholding in ESFB will come down from 95.49 per cent now to about 82-83 per cent post the initial public offer (IPO), comprising fresh issue and offer for sale (OFS) aggregating about ₹500 crore.

The IPO of equity shares of ₹10 face value each will open on October 20 and close on October 22. The price band of the Offer has been fixed at ₹32 to ₹33 per equity share.

AS per Reserve Bank of India (RBI) guidelines, if a SFB aspires to transit into a universal bank, such transition will not be automatic, but would be subject to it applying to RBI for such conversion and fulfilling minimum paid-up voting equity capital / net worth requirement as applicable to universal banks; its satisfactory track record of performance as a SFB for a minimum period of five years and the outcome of RBI’s due diligence exercise.

“By next September, the promoter shareholding has to go down to 40 per cent. So, we are looking at a potential Merger & Acquisition at the Bank level. The Bank will try to take over either a non-banking finance company (NBFC) or a housing finance company (HFC).

“We will issue shares in exchange for the take over so that the promoter shareholding gets diluted. And any left out percentage will be diluted through a block deal. So, that is what we are looking at,” said Vasudevan.

Universal Bank

After ESFB completes five years, it is permitted to apply for a universal bank license. So, subject to board approval, it will be applying to RBI. The Bank commenced operations as a SFB on September 5, 2016.

Vasudevan reasoned: “Priority sector lending target for a universal bank is lower (at 40 per cent of adjusted net bank credit vis-a-vis 75 per cent for a SFB). We will be a Category-I licensed Bank, which means we can deal in foreign exchange.

“Currently, if our SME customer has an export or import requirement, we can’t directly manage his foreign exchange requirements. As a universal bank, we can deal in foreign exchange directly,” he said.

IPO

The Chennai-headquartered Bank’s IPO comprises fresh issue of equity share aggregating up to Rs 280 crore and offer for sale (by the promoter EHL) up to 7.20 crore equity shares (for ₹230.40 crore – ₹237.60 crore).

“Our capital adequacy ratio is around 21 per cent now. Post IPO, it will be slightly over 22 per cent. The purpose of listing is to meet the regulatory requirement. And the purpose of capital raise is to augment growth capital. This will support further growth.

“Actually, we have enough capital – the capital adequacy ratio of 21 per cent is more than enough for another year or two. But as per regulatory requirements we need to list,” said Vasudevan.

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Published on October 15, 2020
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