Equitas stock tanks 6% as it awaits Sebi nod for new plan

Bengaluru: Shares of

Equitas

Holdings fell 6.4% on Monday to Rs 109 after the RBI last week put bars on its

small finance bank

(

SFB

) arm even as it awaits a nod from Sebi for a new plan for listing, which it has submitted to the regulators.

Under the new plan, Equitas SFB will capitalise on its free reserves by issuing its shares to shareholders of Equitas Holdings without cash consideration, in proportion to their holding in the parent firm. SFBs have been in talks with the RBI to relax the listing norms.

The company said that it will go ahead with the IPO if the new plan fails to meet regulatory approval. “We are awaiting feedback from Sebi. After which there are also NCLT approvals. We are in the same boat as our peer Ujjivan, which has filed its DRHP. If our plan does not get regulatory approval, then we will have no option but to go ahead with DRHP, and then the IPO,” said Equitas MD & CEO

P N Vasudevan

. According to Vasudevan, the delay in listing has only been due to the company trying to navigate guidelines and regulations in finding a solution satisfactory to all. “We started the bank in September 2016. Our holding in the bank is 100%. And other than the bank, we don’t have any other significant business, except a small subsidiary. We didn’t see the point of two-listed companies, in essence engaged in the same line of business. And we asked for permission to merge, so that there need be only one-listed company. But the RBI was not able to approve that because of another guideline — that says promoter needs to have shares in the bank locked-in for a period of five years,” explained the MD.

Earlier this year in February, Equitas came with the plan that proposed to offer 47% of its ownership in the bank to existing shareholders and then list the shares on stock exchanges bypassing the public offer route. But it did not meet regulatory approval. The bank was supposed to be listed by September 1, 2019. When it failed to do so the RBI told the bank last week that it cannot extend the timeline for listing of Equitas SFB shares. The regulator also informed Equitas SFB that it cannot open new branches and further restrictions may be imposed if the bank fails to list its shares. Listing of SFBs within three years of reaching net worth of Rs 500 crore is mandatory.

Equitas SFB was badly hit after demonetisation and has been in recovery mode since. Before the microfinance institution became a bank in September 2016, it had recorded a quartely profit of Rs 60 crore. It took two years before its quarterly profits again crossed Rs 60 crore in the June 2019 quarter. The bank’s NPA levels also went up from 1% to 5% after demonetisation, but with the June quarter of 2019, it has brought it below 2.8%.