Equitas Small Finance Bank IPO

Equitas Small Finance Bank IPO

Equitas Small Finance Bank came out with an IPO on October 20, 2020. Here is a detailed study about the company and everything you need to know about the IPO.

In this Blog: ·       IPO details ·       Timetable ·       About the Company ·       Objectives of the offer ·       Brokerage Houses’ View ·       Risks Involved ·       Financials of Bank ·       Grey Market Premium ·       Disclaimer

 

IPO Details

IPO Date	20th Oct 2020 to 22nd Oct 2020
Issue Size	Rs. 517.60 Crores
Fresh Issue	Rs. 280 Crores (remaining promotor’s)
Face Value	Rs. 10 per Equity Share
Price Band	Rs. 32 – Rs. 33 per Equity Share
Market Lot	450 Shares and in multiple of 450 thereafter
Minimum Amount	Rs. 14,400 – Rs. 14,850
Listing	BSE & NSE

 

Timetable

Issue Opens	20th Oct 2020
Issue Closing	22nd Oct 2020
Allotment Finalization	27th Oct 2020
Initiation of Refund	28th Oct 2020
Credit of Share in Demat a/c	29th Oct 2020
Listing Date	02nd Nov 2020

 

About the Company

Equitas Small Finance Bank is the Subsidiary of Equitas Holdings Ltd. It is incorporated in Chennai on June 21^st 1993. They offer variety of products to its customers which includes Small Business Loans, Housing Loans, Agri-Loans, Vehicle Loans, MSE Loans etc. They also take deposits by offering Savings Account, Salary Account, Current Account etc. Majority of their loans consists of Small Business Loans comprising of around 42% of total advances. Micro-finance of around 23% of advances considered as group loans to women.

It is the largest Small Finance Bank in India in terms of no. of Banking Outlets and second largest in terms of AUM (Assets Under Management) as per CRISIL India Report, 2019.

Equitas is the third SFB to release IPO after AU Small Finance Bank and Ujjivan Small Finance Bank.

 

Objectives of the Offer

The offer comprises of Offer for Sale (OFS) and Fresh Issue.

The Bank proposes to utilize the Net Proceeds from the offer towards augmenting its Tier I Capital Base to meet its future capital requirements.

Tier I Capital or the Base Capital of Bank must be 15%. The IPO proceeds are intended to be utilized to increase this capital.

 

Brokerage Houses’ View

Majority of Brokerage houses advised subscribing the issue with long term prospective given Bank’s strong Capital Ratio, good management, strong advances growth along with maintaining asset quality, good liquidity and vast opportunity for business as it serves un-served and under-served customers.

 

Risks Involved

·       Impacts of Covid-19 may have adverse impact on Bank’s performance as majority of Loans are given to small businesses

·       Banking companies in India, are currently required to prepare financial statements as per Indian GAAP. However, the promoter of Equitas SFB, Equitas Holdings Limited (EHL), currently prepares its financial statements under Indian Accounting Standard (Ind AS) and as a result, it is required to prepare limited financial information in accordance with the accounting policies of EHL for the limited purposes of consolidation by EHL. Differences exist between Ind AS and Indian GAAP, which may be material to investors’ assessment of the bank’s financial condition. Ind AS financial information that it may be required to prepare in the future will not be comparable to the financial information it currently prepares in accordance with the accounting policies of EHL for the limited purpose of consolidation of EHL’s financials.

·       Majority of Business of the Bank is in the State of Tamil Nadu, any adverse effect on the demography may impact its cash flows.

·       Unsecured Business Loans and Micro-finance Loans are not supported by any collateral, thus, collection of Balance becomes a tough job.

·       RBI has taken actions against the Bank in multiple occasions in 2016, 2018 and 2019, further it has a risk of heavy penalties in future due to weak compliances or non-compliance with RBI Norms.

 

Financials of Bank

Particulars	30-06-2020	31-03-2020	31-03-2019	31-03-2018
Total Assets	20892	19314	15763	13301
Total Income	751	2928	2395	1773
Total Expenses	693	2684	2184	1741
Profit after Tax	58	244	211	32

(all figures in Rs.Crore)

 

Grey Market Premium

Grey market premium as on today is ₹2-3, Kostak ₹N/A & Subject to Sauda is ₹1000

(Kostak Rate is the premium one gets by selling his/her IPO application (in an off-market transaction) to someone else even before allotment or listing of the issue. Do not subscribe for IPO by just seeing premium Price as it may change anytime before listing. Subscribe only considering Fundamental of the companies)

GMP is just for knowledge purpose. We at Market Brains do not support or execute grey market trades.

 

Disclaimer

Market Brains by HKD is not a registered investment, legal or tax advisor or a broker/dealer. All Investment / Financial opinions expressed by Market Brains are from personal research of the owner of the Blog and based upon information obtained in good-faith from sources believed to be reliable. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

 Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Market Brains do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.