Equitas Holdings to raise Rs 2,176 crore through IPO

After IPO, foreign shareholding to come down to 35%, from 93%

Equitas Holdings, that has been granted an in-principle approval for a small finance bank (SFB) by the Reserve Bank of India (RBI), is planning to raise Rs 2,176 crore through an initial public offering (IPO) of shares next week. The company has fixed the price band between Rs 109 and Rs 110 a share. The IPO will open on April 5 and close two days later. The company is currently valued at Rs 3,700 crore.

With this issue, Equitas is aiming to bring down its foreign shareholding below 49 per cent as mandated by the banking regulator. After the IPO, its foreign shareholding will come down from the current 93 per cent to 35 per cent.

This is necessitated by the fact that foreign shareholding rules for SFBs is the same as the foreign direct investment (FDI) policy for private sector banks. At present, private banks can have foreign shareholding of up to 49 per cent through the automatic route and can go up to 74 per cent after an approval from the Foreign Investment Promotion Board (FIPB).

At the end of quarter ended December, Equitas had asset under management (AUM) of Rs 5,500 crore. Its gross non-performing assets (NPAs) at the end of December stood at 1.3 per cent.

"Post the IPO, the company will be looking at consolidating its three subsidiaries under the holding company. After, this they need to obtain several other licences before approaching RBI for the final licence for SFB," said P N Vasudevan, managing director, Equitas Holdings. Though the management did not give any specific guidance on profitability, it is expected to remain under pressure as the bank transforms itself from a microfinance institution to a SFB.

Last year, RBI had granted SFB licences to 10 of the 72 applicants. These SFBs will be similar to the existing commercial lenders and will undertake basic banking activities such as accepting deposits and lending to the un-served and under-served sections. Their loan size and investment limit exposure to single and group obligators cannot be more than 10 per cent and 15 per cent of their capital, respectively. Also, at least 50 per cent of their loan portfolio has to include loans and advances of up to Rs 25 lakh.