 "Our vision is to serve 5% households by 2025: Equitas chairman")
In his first letter to the public shareholders, after a successful IPO , company's Chairman and Independent Director N Rangachary said the company has been following its core value 'fairness and transparency' while dealing with its stakeholders.
In April, Equitas' Rs 2,170 crore initial public offering (IPO) saw a 17-times more demand than shares on offer, despite no participation by foreign institutional investors (FIIs).
Equitas currently serves about 1% of the Indian households. With the conversion to a bank and critical expansion in the product and service offerings with inclusion of savings, deposits, remittance and third party products such as pension and insurance, the company expects to provide a more comprehensive service to the low income households as it steadily progress towards its vision.
"We continue to remain committed to and carrying out our mission 'empowering through financial inclusion and our vision is to serve 5% of Indian households by 2025," he said in the letter.
The proposed SFB will focus on four key strategies including offering existing range of credit products such as micro-finance, small enterprise loans, business banking loans for tiny to small commercial establishments, commercial vehicle finance and affordable housing finance. Besides, the company would be looking to offer a few cross sell products such as loan against gold, etc.
Equitas also plans to leverage its existing network of branches and customer base to build a community banking channel. Business Correspondents (BCs) appointed under each branch, would be able to provide easy, convenient and comfortable access to clients for doing even small value banking transactions.
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"By appointing BCs from the same community, we expect that the diffidence which such clients experience in mainstream banking would cease, enabling them to save for planned future expenses, even if it is in tiny amounts at frequent intervals," he added.
Equitas offer multiple channels to clients to access their accounts with the bank including digital channels such as net banking and mobile banking, offer third party products and services such as insurance, pension and 3-in-1 accounts to enhance the value to clients.
The company also plans to improve its operational efficiency and risk management through technology-enabled operating procedures which would help in reducing cost to borrowers over time.
Over time, the SFB will mobilise retail deposits that will aid in reducing the overall cost of funds and build a strong base of mass and affluent banking customers.
The SFB hopes to be driven predominantly by two channels including a large network of community bankers by appointing Business Correspondents and its own branch network catering to mass and affluent customers.
Currently, Equitas has around 540-odd branches and around 400 of them will be converted into liability. The remaining will be run as asset branches. Currently, the company has close to 2.2-2.8 million clients with whom Equitas has deals either on a fortnightly basis or on a monthly basis.
As the organisation transforms itself into a SFB, two distinct portfolios will emerge - Retail Asset and Retail Liabilities. The Retail Assets will continue to grow through established lines of business like micro-finance, used commercial vehicle finance, MSE finance, home loans etc. The Retail Liabilities will focus on mobilising funds through retail household accounts.
As at the end of year, EMFL's Capital to Risk Adjusted Assets (CRAR) was comfortable at 21.70% against the regulatory requirement of 15%. During April 2016, the holding company has infused fresh capital of Rs 288 crore out of the funds raised from IPO, which significantly improved the CRAR.
Structure
Right now the holding company has three operating subsidiaries and they will be merged once we get orders from the High Court. Once the company gets licences in place, the merged subsidiary will be one which will commence operation as a bank.
The holding company remain as a holding company and the bank will be 100% owned subsidiary of the holding company. As per RBI's norm the bank must be listed within three years of commencing operations.
At the time when the bank is required to be separately listed, the company plans to approach RBI for reverse merging the bank with the holding company so that it will have only one listed entity doing business, said the company.
To float a new IT subsidiary
Equitas Holdings, one of the small finance bank (SFB) licence holders, has floated a new subsidiary called Equitas Technologies Private.
The new subsidiary is creating an electronic platform to bring together people who want to transfer loads and people who have trucks for transporting them.
The basic objective of this company is to see whether Equitas could bring them together in a manner which makes it useful for both to operate and transact with each other.
This company is in the process of commencing its operation through the portal now and hence we will have more details to share in the following quarters, company's management told in the recent analyst call.
The management said the company is in the vehicle financing ie used commercial vehicles financing space and it see a lot of leveraging and cross selling opportunities in that space where its clients themselves could come on the platform and if their ability to use vehicle increases, their cash flow increases, which could improve the quality of its loan book.
Besides, they could also be a potential customer for company's future loans as a bank. The company sees lot of synergy in that and that is where the whole thing has come from.