The amalgamation is directed to fulfill RBI’s licensing conditions in order to bring down the shareholding of the holding company to 40% within a period of 5 years from the date of commencement of business of the bank.
An 8.58% rise in shares of Equitas Small Finance Bank (SFB) was witnessed in early trade after the boards of the parent company Equitas Holdings and the subsidiary Equitas SFB cleared their merger plan. This was done mainly to meet the promoter holding norms in the Equitas SFB.
As per the new plan, the shareholders of Equitas Holdings will get 231 units of SFB for every 100 shares held, which is higher than 226 as in the previous plan. Based on this swap ratio, the shareholders of the holding company will get 79 crore shares, or 71% stake in Equitas SFB valued at Rs. 41.8 Billion (assuming ESFB’s CMP at Rs. 53)
After the completion of the amalgamation, the holding company will cease to exist and ESFB will have 100% public shareholding.
Equitas Small Finance Bank stock zoomed 8.58 percent to Rs 57.55 against the previous close of Rs 53 on BSE today.
“Overall, ESFB has done very well on the liability front while diversifying its asset base away from MFIs. However, since its asset quality has weakened due to the Covid-induced shock, ESFB needs to focus on improving the portfolio quality/mix as well as building better provisioning buffers. We believe that once the merger is completed, ESFB will apply for a universal banking licence, which should be long-term positive for ESFB,” the Emkay Research Report stated.
Meanwhile, Motilal Oswal said, “Overall, ESFB has done very well on the liability front while diversifying its asset base away from MFIs. However, since its asset quality has weakened due to the Covid-induced shock, ESFB needs to focus on improving the portfolio quality/mix as well as building better provisioning buffers. We believe that once the merger is completed, ESFB will apply for a universal banking licence, which should be long-term positive for ESFB.”
