Equitas Small Finance Bank Pre-IPO - Another forced listing
Equitas Small Finance Bank (ESFB) plans to raise up to US$150m via selling a mix of primary and secondary shares in its Indian IPO.Like Ujjivan Small Finance Bank before it, ESFB too is nearly the same as its already listed parent, Equitas Holdings, in terms of operations and the only reason for its listing, is to comply with RBI’s strict requirements. Thus, it's not really an IPO, considering that the parent itself only listed in 2016 and its assets and earnings are nearly identical to what ESFB will offer once listed.
In this note, I’ll broadly look at the company’s past performance and some of the issues which could impact the deal.
ESFB’s assets and income growth has been strong, however, net income has been more haphazard owing to fluctuations in operating expenses. Moreover, while its NIM is quite high, its returns have been subdued due to high cost-to-income.
Even post listing, Equitas will only have a window of a few months to reduce its stake in ESFB further to 40% by Sep 2021.
Equitas Holdings Limited (EHL) is the holding company. The Company is engages in the businesses through its subsidiaries: Equitas Micro Finance Limited (EMFL), which is engaged in micro finance; Equitas Finance Limited (EFL), which provides used commercial vehicle (UCV) loans, micro and small and enterprise (MSE) finance, and others; Equitas Housing Finance Limited (EHFL), which is engaged in affordable housing loans and micro housing loans, and Equitas Technology Private Limited (ETPL), which offers technology platform for freight, logistics, carriers and related services. The Company's segments include Micro Finance, Other Finance and Others. The Micro Finance segment consists of micro financing. The Other Finance segment consists of housing finance and vehicle finance. The Company also provides loans to subsidiaries and corporate guarantees for the borrowings of subsidiaries from banks and institutions.
Aequitas Research is a leading ECM research firm with a focus on IPOs and placements/follow-on offerings across the Asia Pacific with deal size of over USD100m.
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