Ujjivan, Equitas tank upto 40% post RBI circular to list Small Finance Bank

Equitas Holdings tanked 40% to Rs 78, while Ujjivan Financial Services plunged 24% at Rs 167, their respective lowest level since listing on the BSE in intra-day trade on Friday.

The shares of Ujjivan Financial Services and Equitas Holdings fell by up to 40% on the BSE in intra-day trade, after these companies informed the exchanges that the Reserve Bank of India (RBI) told them to comply with the original license conditions.

Equitas Holdings tanked 40% to Rs 78, while Ujjivan Financial Services plunged 24% to Rs 167 on the BSE in intra-day trade today.

At the end of the day, Equitas Holdings closed 23% down at Rs 99 and Ujjivan Financial Services closed 18% lower at Rs 181. On comparison, the S&P BSE Sensex ended 1% lower at 33,349 points. Both these stocks were trading at their respective lowest level since listing. The trading volumes on these counters surged more than 40-times, as compared to two week average volumes on the BSE.

“The RBI vide its letter dated October 24, 2018 has reiterated that the bank should comply with all the requirements of the guidelines for licensing of Small Finance Banks dated November 27, 2014 and the terms and conditions of the banking licence issued to it specifically regarding listing of the bank within three years from the date of commencement of its operations i.e. by January 31, 2020 and maintaining the promoter shareholding in the bank to at least 40%, for a period of five years from the date of commencement of business of the bank i.e. until January 31, 2022,” Ujjivan Financial Services said in a regulatory filing.

“RBI while granting approval to the Company to establish a Small Finance Bank had stipulated that the bank should be listed within three years from the date of commencement of operations,” Equitas Holdings said in a separate filing.

As a result of this, they will have to Ujjivan Financial Services and Equitas Holdings to list the Small Finance Bank by the time it completes three years of operations, i.e., by January 2020 for Ujjivan and September 2019 for Equitas.

These companies said that they will approach RBI to merge the bank with the holding company after the promoter lock-in expires, i.e., by January 2022 for Ujjivan and September 2021 for Equitas.

“Since, the development will result in a dual listing of the bank and the holding company, this could lead to deepening discount on the currently listed entity for both companies, that is, their holding company,” IIFL Securities said.