InvestorQ : What are the details, core business & risks of Equitas Small Finance Bank IPO?
Ira Shah made post

What are the details, core business & risks of Equitas Small Finance Bank IPO?

2 years ago
The initial public offering (IPO) of Equitas Small Finance Bank (SFB) opened today, with the company planning to raise Rs 280cr through a fresh issue and sell 7.2cr existing shares for a total issue size pegged at Rs 510-518cr. The company’s listing date is expected to be November 2. The price range for the share sale has been set at Rs32-33/share. Applicants can bid for a minimum of one lot of 450 equity shares and in multiples of 450 equity shares, extending up to 13 lots. 

ESFB intends to utilize the fresh capital which towards augmenting the bank’s Tier – 1 capital base to meet its future capital requirements such as organic growth and expansion and to comply with regulatory requirements for the enhanced capital base. 

The company provides microfinance loans promoting financial inclusion, housing finance, vehicle finance, and MSE finance. ESFBL offers financial products according to customers' income profile, type of security available and nature of business. Apart from this, the bank also provides current accounts, salary accounts, savings accounts, other deposit accounts, ATM-cum-debit cards, mutual fund products, third party insurance, and issuance of FASTags.

ESFBL follows credit assessment procedures through a risk management framework which is analyzed by its Risk Management Committee. As of 30th Sep 2019, it has the largest distribution channel among Small Finance Banks (SFBs) including 853 Banking Outlets and 322 ATMs in India across 15 states and union territories.

The continuing impact of COVID-19 is highly unpredictable with the chance of being significant. ESFBL is subject to stringent regulatory requirements including RBI’s SFB Licensing Guidelines as per which ESFBL’s Promoter Equitas Holdings Limited is required to reduce its shareholding in ESFBL to 40% on or prior to Sept 4, 2021.

Furthermore, post transitioning into an SFB, its primary source of funding has been deposited. It has a continuous requirement of funds and the inability to access sources of funds in an acceptable and timely manner could affect its operations.