Speaking exclusively to businessline on the side lines of the reverse merger getting the final approval, PN Vasudevan, MD & CEO, Equitas Small Finance Bank says the logical next step is to become a universal bank. When asked about why he decided to stay with the bank, he insisted that bygones should be bygones. Edited excerpts:
The clearance for the reverse merger has come in place a little ahead of the timeline. What are the next steps?
NCLT has approved the merger and so the effective date is, January 1 and that is that date on which the balance sheets will get merged. We need to get a certified copy of this order and file it with the Registrar of Companies. Once we do that, then the whole thing takes effect. The board will shortly meet and fix the record date (for the stock exchanges) and then that will be announced to the market. Whoever holds shares in the holding company will get corresponding shares in the bank.
What will the merger do to your financials?
This merger was one of our licensing conditions, as the promoter stake in the bank should be brought down to for not more than 40 per cent after five years of lock-in. The holding company is the technical promoter of the bank, and we needed it for the first period of five years. Now that it’s over, we got necessary approvals to merger the holding company with the bank. There is no other activity in the holding company and hence it’s a technical merger; doesn’t change much for the financials. There’s about ₹300 crore of cash in the holding company which will add to the net worth of the bank. Our capital adequacy is around 23 – 24 per cent and it may increase by 1 – 2 per cent. But more than anything, it completes our compliance requirements as per the licensing conditions.
Does it set the stage to contend for universal bank license?
Yes, it paves the way for that. We would reach out to the RBI on whether we are eligible to apply for a universal bank. If they permit us, we will go for it.
Do you have time frame in mind?
We still have some more procedures as I told you. Once it’s done, the whole process will get completed which I’m hoping will happen in the next 30 days. After that we’ll reach out to the RBI.
Maximum within a quarter in that case?
In May 2022, you wanted to step down from the bank. Now you’ve decided to stay back…
Let the bygones be bygones. There was a particular reason why I thought I should step down and do something. The Chairman (of the bank) has been discussing (it) with me. We felt that I could achieve my other objectives without leaving the bank and hence decided that I should continue. Our portfolio is very diversified. Our NPAs have been coming down consistently. We are trending to the pre-Covid level. Overall, we are very well-positioned to grow the bank. That would include the universal bank and AD-1 licenses and hopefully we should become stronger as we go forward.
Your current term is expiring in July 2023…
The board has approved for a three-year extension, and we have applied to the RBI as well.
With an eye on universal bank license, are you looking at new products to enter?
Currently we are a highly commercial-oriented bank. We are not really into the consumer space – like personal loans, credit cards, new car loans etc. All our loans are only given for people who are running a business. Within that, again, 90 per cent of our loans are for people in the informal sector and we are widely dispersed in that segment. So, we are not in a hurry to add too many new products. But slowly as we mature, and our cost of funds starts going down, we will look at more products like a personal loan. But for the present, we are comfortable with what we have.
Anything inorganic that the bank is evaluating because during IPO you seemed open to acquisitions?
No, hands are very full with organic growth. We can grow at 25 – 30 per cent annually. For a lending institution, it’s not only a good growth rate but if we can manage that well, that itself is an achievement.