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Equitas SFB is currently in the process of coming out with an IPO of Rs517.6 crore via stake sale (Nathan G/Mint)
Equitas SFB is currently in the process of coming out with an IPO of Rs517.6 crore via stake sale (Nathan G/Mint)

Equitas SFB looking at inorganic buyouts post IPO

  • The bank is looking to acquire a housing finance company or a non-banking finance company as regulatory guidelines say the promoter has to reduce stake in an SFB to 40% before September next year

Equitas Small Finance Bank (SFB) Ltd is looking at inorganic growth opportunities to bring down the promoter stake post completion of the initial public offering process. Speaking exclusively to Mint, managing director and chief executive officer P.N. Vasudevan said the bank is looking to acquire a housing finance company or a non-banking finance company. According to regulatory guidelines, the promoter has to reduce stake in an SFB to 40% before September next year

“There are two routes available at the bank level, which will dilute the hold co. One is M&A and the other is block sale by the hold co. We have been on the job for many months. We will look at an HFC or an NBFC," said Vasudevan.

Equitas SFB is currently in the process of coming out with an IPO of Rs517.6 crore via stake sale. The bank has fixed price band of Rs32-33 per equity share for its initial public offering (IPO). The three-day share sale, which will open for subscription from 20-22 October will aim to raise Rs517.6 crore at the upper end of the price band. The IPO consists of a fresh issue, aggregating up to Rs280 crore and an offer for sale of up to 72 million equity shares by Equitas Holdings Limited (EHL). Bids can be made for a minimum of 450 equity shares and in multiples of 450 equity shares thereafter.

While the bank is comfortably capitalized with tier 1 capital at 21%, the bank has to meet the regulatory requirement of listing the bank within three years of operation, explains Vasudevan

Equitas SFB intends to seek in- principle approval from RBI to undertake a merger of its promoter Equitas Holdings Limited with the bank. Post the listing of the bank, Vasudevan believes that there is no need to keep two listed entities. However, regulatory requirements mandate that the holding company should be allowed to continue for the first 5 years of operations of the bank. The deadline for this is set to expire in September next year.

Equitas Small Finance Bank Ltd 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. Their asset products include small business loans, housing loans, and agriculture loans, vehicle loan, MSE loan, etc. On the liability side, they offer 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 stood at Rs15,572.91 crore as of 30 June, 2020; of which secured advances constituted 75.75% by the quarter. Their deposits has grown at a CAGR of 38.75% from Rs5,603.97 crore as of 31 March, 2018, to Rs10,788.41 crore as of 31 March, 2020.

According to Vasudevan, nearly 40% of the bank’s loan book is under moratorium as of June end, compared with 95% earlier. The bank has also seen collection efficiency improve to 84% post the lifting of the lockdown. He also assured that the asset quality has been maintained at 2.6-2.8% over the last few years. He added that only the commercial vehicle segment, which constitutes 24% of the total loan book will see restructuring under the covid scheme.

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