Equitas Small Finance Bank is the largest SFB in India in terms of number of banking outlets, and the 2nd largest SFB in India in terms of Assets under Management and total deposits in Fiscal 2019. ESFB has been able to successfully diversify their loan portfolio and significantly reduce their dependence on the microfinance business as compared to other microfinance companies that have converted to SFBs.
Company asset products include small business loans, housing loans, and agriculture loans, Vehicle Loan, MSE Loan etc. On the liability side, they offer current accounts, salary accounts, savings accounts, and a variety of deposit accounts to their clients. In addition, ESFB also provide non-credit offerings comprising ATM-cum-debit cards, third party insurance, mutual fund products, and issuance of FASTags.
Selling Shareholder- Equitas Holdings Limited
|Objects of the issue||The bank proposes to utilize the Net Proceeds from the fresh issue offer towards augmenting the Bank’s Tier I capital base to meet the future capital requirement.|
|Issue Size||Issue Size: Rs.517.6 Crore
Offer for Sale – 237.60 Crore
Fresh Issue– 280 Crore
Rs.10 Per Equity Share
|Issue Price||Rs. 32 – Rs. 33|
|Bid Lot||450 shares|
|Issue Opens:||20th October 2020 – 22nd October 2020|
|QIB||50% of Net Issue Offer|
|NIB||15% of Net Issue Offer|
|Retail||35% of Net Issue Offer|
|Shareholding Pattern||Pre- Issue||Post Issue|
|Promoters & Promoters Group||95.49%||82.05%|
Source: DRHP, EWAL Research
Customer centric organization with a deep understanding of the unserved and underserved customer segment
Among the largest SFBs in India with a well-diversified asset portfolio
Strong retail liability portfolio with a strategic distribution network
The gross advances of the SFB have grown to Rs 15,572.91 crore as of June 30 from Rs 15,366.94 crore as of March 31, 2020 and Rs 11,702.85 crore as of March 31, 2019.
Deposit for the bank rose at a compounded annual growth rate of 38.75 per cent to Rs 10,788.41 crore in FY20 from Rs 5,603.97 crore in FY18.
As of June 30, 2020, Gross NPAs were Rs. 416.67 crore, or 2.68% of Gross Advances and Net NPAs were Rs.213.37 crore, or 1.48% of net Advances.
Its CASA ratio was 29.23 percent, 25.25 percent, 20.47 percent and 19.97 percent as of FY18, FY19, FY20 and June quarter 2020, respectively.
The bank experienced a significant decline in collections as a major proportion of its collections is cash-based and involves physical presence of their employees.
There has been and there may continue to be a decline in disbursements due to reduced economic activity.
There may be a significant increase in the NPA levels due to possible deterioration in the credit quality of its customers.
Equitas Small Finance Bank offers a range of banking products and services to customers with a focus on serving the financially unserved and underserved customer segments in India. The IPO is mainly to meet the RBI’s regulatory norms that require the banking subsidiary to be listed within three years of commencement of operations. As of June 30, 2020, the bank had 856 banking outlets and 322 ATMs spread across 17 states and union territories in India. The company has a diversified portfolio with advances growing at 34% compound annual growth rate from FY18-20 to Rs 13,747 crore. The IPO is valued at P/B multiple of 1.2 on Post IPO basis which is lower than peers. Provision coverage ratio of the bank stood lower at 48.8%. Equitas Small finance non- performing asset quality is higher at 2.7% as compared to its peers. Assets quality of Ujjivan and AU Small Finance bank stood at 1% and 1.7% respectively. Considering Risk Factors of the company we would recommend avoid to this IPO.
DISCLOSURE IN PURSUANCE OF SECTION 19 OF SEBI (RA) REGULATION 2014
Elite Wealth Advisors Limited does/does not do business with companies covered in its research reports. Investors should be aware that the Elite Wealth Advisors Limited may/may not have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as read more
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