 "Equitas Holdings: Risk-reward favourable")
Equitas Holdings’ Rs 2,170-crore initial public offering (IPO) was subscribed 7.2 per cent on Tuesday, first day of the issue. The 139-million share offering received bids for around 10 million shares. A day earlier, the micro finance lender had raised around Rs 650 crore from anchor investors by allotting 59.3 million shares at Rs 110 apiece.
The price band for the IPO is Rs 109-110 a share. Equitas Holdings is the country’s first small finance bank licence recipient to come out with an IPO. The IPO is the biggest since InterGlobe Aviation’s Rs 3,000-crore issue last October.
Of the total size, Rs 1,450 crore is an offer for sale by existing shareholders and Rs 720 crore is a fresh issue of shares. The company will use fresh capital mobilised from the IPO to boost its capital base.
Equitas Holdings will have a post-issue market capitalisation of Rs 3,680 crore. Axis Capital, Edelweiss Financial, HSBC Securities and ICICI Securities are the investment bankers handling the issue. Most analysts believe the company’s offering is reasonably priced and a good long-term bet.
At the upper band of Rs 110, Equitas is valued at 1.85 times its 2015-16 price-to-book ratio. Analysts say this is attractive as it is lower than that of private-sector lenders.
Equitas offers return on equity and return on assets of 13 per cent and 3.1 per cent, respectively. Analysts say the company might witness contraction in return ratios in the near term, owing to increased investments.
