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Equitas Small Finance Bank fully subscribed on final day, QIB portion 1.6 times

ICICI Direct also has a subscribe recommendation on the stock as Equitas Small Finance Bank had strong advances growth along with it maintaining the asset quality.

The Rs 518 crore public offer of Equitas Small Finance Bank has been fully subscribed on October 22, the final day of bidding. The IPO has seen tepid response so far despite attractive valuations.

The offer has received bids for 12.95 crore equity shares against offer size of 11.58 crore equity shares, the subscription data available on the exchanges showed. The offer size excluded anchor book, through which company had raised Rs 140 crore on October 19.

This is the third public issue in small finance bank segment after AU Small Finance Bank and Ujjivan Small Finance Bank.

The portion set aside for qualified institutional investors has been subscribed 1.6 times, and that of non-institutional investors 6.3 percent and retail investors 1.58 times.



The bank also reserved a portion for its employees and promoter Equitas Holdings' shareholders which subscribed 1.08 times and 27 percent.

The public issue consists of a fresh issue of Rs 280 crore and an offer for sale of 7.2 crore equity shares by Equitas Holdings to comply with shareholding norms set by the Reserve Bank of India. The issue price has been fixed at Rs 32-33 per share.

As per the mandate, Equitas Holdings has to reduce its shareholding in Equitas Small Finance Bank up to 40 percent till September 2021. Hence, Equitas Holdings could be looking for merger & acquisition and bulk stake sale, and it is also in the process of seeking principle approval from RBI for its merger with the bank.

The IPO launch has been delayed and the issue size has also been reduced to little over Rs 500 crore due to current market conditions and adequate funds with the bank.

Equitas Small Finance Bank is one of the leading small finance banks in terms of its presence and asset under management. It will utilise the net proceeds from the fresh issue towards augmenting Tier I capital base to meet its future capital requirements.

"Past good performance has built the growth drivers and provides better prospects for the bank's performance in the future," said KR Choksey which has a long-term positive view on the stock and recommend subscribe for the issue.

"The bank is being issued at a valuation of around 1.23x P/BV at the upper price band of Rs 33 as on Q1 FY21," the brokerage added.

ICICI Direct also has a subscribe recommendation on the stock as Equitas Small Finance Bank had strong advances growth along with it maintaining the asset quality."Unserved and underserved customers as target offer a vast opportunity for business growth."

Equitas Small Finance Bank is the largest SFB in India in terms of number of banking outlets, and the second-largest SFB in India in terms of AUM and total deposits as on FY19. As of June 2020, the bank had 856 banking outlets and 322 ATMs spread across 17 states and union territories in India.

It has a diversified portfolio with advances growing at 34 percent CAGR from FY18-20 to Rs 13,747 crore and during the same period, deposits grew at 39 percent CAGR to Rs 10,788 crore. Asset quality has remained steady with gross non-performing assets ratio at 2.68 percent and net non-performing assets ratio at 1.48 percent as on June 2020.

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