BackEquitas SFB, Equitas Holdings surge on board nod for merger scheme. ICICI Securities sees more upside
Equitas Holdings and Equitas Small Finance Bank's board of directors and shareholders on Monday approved the amalgamation scheme of the two companies
PremiumEquitas Small Finance Bank and its promoter or holding Equitas Holding shares surged on Tuesday after the companies' board of directors and shareholders on Monday approved the amalgamation scheme of the two companies. Shares of Equitas Small Finance Bank (ESFB) were trading over 5% higher whereas that of Equitas Holding (EHL) more than 8% higher in early deals.
The share exchange ratio would result into each shareholder of the transferor company, EHL, getting 226 equity shares of the transferee company, ESFB, for every 100 shares held by them in the holding company.
Earlier this month, Equitas SFB had received Reserve Bank of India's (RBI) nod to apply for amalgamation of the promoter into itself. The intent of the amalgamation is to comply with the RBI norms on small finance banks, mandating the promoter to reduce the stake in the subsidiary to 40% within five years of commencement of operations by the SFB.
The scheme contemplates the amalgamation of EHL into and with ESFB and the dissolution "without winding-up of the transferor company pursuant thereto".
ICICI Securities in a note on Equitas SFB said that the current promoter holding (EHL) stands at ~82% and, post the successful completion of merger, public holding will increase to 100% given that EHL is not backed by an identifiable promoter. As per the brokerage firm's estimates, the proposed merger is roughly 10% accretive to ESFBL’s book value.
It has maintained its 'Buy' rating on the stock with the target price of ₹92 per share. It sees delay in merger process, and moderation in loan growth as key risks.
EHL is a RBI registered non-deposit taking systemically important core investment company. ESFB is engaged in retail banking business with focus on micro finance, commercial vehicle finance, home loan, loan against property and corporate loan, as well as financing to individuals and micro & small enterprises.
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