Equitas SFB slips 13% as new shares list post merger with Equitas Holdings

Total 789.53 million shares have been listed pursuant to the scheme of amalgamation of Equitas Holdings with Equitas Small Finance Bank

Shares of Equitas Small Finance Bank (SFB) slipped 13 per cent to Rs 63.81 on the BSE in Friday’s intra-day trade following the listing of its new 789.53 million shares pursuant to the amalgamation of Equitas Holdings with the bank. In the past two trading days, the stock has dipped 15 per cent. It had hit a 52-week high of Rs 77.87 on Monday, March 6, 2023.

“933.94 million shares of Equitas SFB have been cancelled on account of cross holding, which were held by Equitas Holdings in Equitas SFB,” BSE said in notice dated March 9, 2023. CLICK HERE FOR DETAILS

At 09:26 am; Equitas SFB was trading 12 per cent lower at Rs 64.69 on the BSE. In comparison, the S&P BSE Sensex was down 1.2 per cent at 59,103.

Despite the decline in last two sessions, the stock has outperformed the market by surging 17 per cent over the past three months as against a 5 per cent fall in the benchmark index. In the past six months, it has zoomed nearly 40 per cent as compared to a 1.2 per cent decline in the Sensex.

As a new-age bank, Equitas SFB offers a bouquet of products and services tailored to meet the needs of individuals with limited access to formal financing channels, as well as affluent and mass-affluent, Small & Medium Enterprises (SMEs), and corporates.

In the October-December quarter (Q3FY23), Equitas SFB reported a beat on profit after tax (PAT) at Rs 170 crore, mainly on account of lower provisions, partly offset by flattish margins and higher staff expenses as the bank adds headcount to bolster business growth.

Headline NPA ratio, meanwhile, moderated to 6.3 per cent, while the bank used Rs 40 crore from the contingent buffer (now at Rs 60 crore/3 per cent of loans), analysts said.

The bank expects growth to remain healthy at 25 per cent YoY for FY23 given strong underlying demand. The bank’s strategy to diversify its portfolio mix towards secured loans should keep margins in check in the mid-to-long term, analysts at Emkay Global Financial Services said in a Q3 result update.

The brokerage expects the bank to apply for a Universal Banking license post reverse merger of the holding co; this could hasten the portfolio diversification and simultaneously benefit the bank by mobilizing low-cost deposits.

Further, founder cum MD & CEO Mr. P N Vasudevan has decided to stay back with the bank and the board has decided to renew his term for 3 years, from Jul-2023 (subject to RBI approval).

Analysts said the decision of the Founder cum MD & CEO of revoking his resignation is a welcome step, but the bank needs to strengthen top-management bandwidth as part of the succession plan, to minimize management-transition risk in future.