Equitas Small Finance Bank Share price and Fundamental Analysis

Company History

Equitas Small Finance Bank Limited was incorporated on June 21st, 1993 as V.A.P. Finance Private Limited and later renamed as Equitas Finance Private Limited in August, 2011. In 2011, Equitas Holdings Limited acquired the Company. The Company's name was subsequently changed to Equitas Finance Limited in September 2015 consequent to it becoming a Public Limited Company.

Equitas Bank is one of the largest small finance banks in India. As a new-age bank in one of the fastest growing economies, it offers a bouquet of products and services to meet the needs of its customers - individuals with limited access to formal financing channels, Micro, Small & Medium Enterprises (MSMEs) and corporates. The Bank's firmly entrenched strategy focuses on providing credit to the unbanked and underbanked micro and small entrepreneurs, developing products to address growing aspirations at the bottom of the pyramid', fueled by granular deposits and value for money' banking relationships.

The Bank's asset products are suited to a range of customers with varying profiles, which include provision of Small Business Loans (SBLs) comprising loan against property, housing loans, and agriculture loans to micro entrepreneurs, microfinance to joint liability groups predominantly comprising women, used and new commercial vehicle loans to drivers and micro entrepreneurs, MSE loans to proprietorship, and loans to non-banking financial companies (NBFCs). On the liability side, the Bank's target customers comprise mass and mass-affluent individuals to whom it offers current accounts, salary accounts, savings accounts, and a variety of deposit accounts. In addition, the Bank provides noncredit offerings comprising ATM-cum-debit cards, third party insurance, mutual fund products, and issuance of FASTag.

Pursuant to a Scheme of Amalgamation approved by the Hon'ble High Court of Judicature at Madras, and upon fulfillment of all conditions specified under the said Scheme, Equitas Micro Finance Limited and Equitas Housing Finance Limited amalgamated with the Company, and the Company was renamed Equitas Small Finance Bank Limited (ESFBL). Consequent to the above amalgamation the microfinance and housing finance businesses of the erstwhile EMFL and EHFL were transferred to the Company effective September 2, 2016. ESFBL commenced its banking operations after the receipt of final banking license from the Reserve Bank of India on September 5, 2016.

The Bank is engaged in retail banking business with focus on micro-finance, commercial vehicle finance, home finance, loan against-property finance,corporate finance, and providing financing solutions for individuals and micro and small enterprises (MSEs) that are underserved by formal financing channels while providing a comprehensive banking and digital platform for all.

Banking Outlet comprises branches primarily focusing on garnering and servicing depositors and outlets that conducts lending operations for underbanked and unbanked. The Bank deployed 322 ATMs and cash recyclers at their banking outlets to save valuable time making the same as a pleasant experience. At present, the Bank operates from more than 853 locations across 15 States/Union Territories (including National Capital Territory) of the country.

The Board of Directors of ESFBL and EHL in their respective Meetings held on January 31, 2019 and February 1, 2019 approved a Scheme of Arrangement between EHL, ESFBL and the respective shareholders contemplating issue and allotment by ESFBL of 89,20,62,982 fully paid-up equity shares for no cash consideration to the shareholders of EHL as of the Record Date set out in the Scheme and consequent reduction by ESFBL of Securities Premium Account, the revenue and other reserves and the surplus in Profit and Loss Account by an amount equal to the face value of the shares of ESFBL issued under the Scheme.

The Bank in its Meeting held on December 6, 2019 approved issue of 4,74,58,239 Equity Shares of Rs 10 each at a price of Rs 52.68 per equity share (including a premium of Rs 42.68 per equity share) aggregating to Rs 250 crores, by private placement to IIFL AIF through its various funds for a stake of 4.51% in post-issue paid-up share capital of Bank.

In the Board Meeting of the Bank held on 23 March 2020, following approvals were accorded, to make loans upto Rs 18000 Crore in ordinary course of business for Financial Year 2020-21; that subject to approval of shareholders, to borrow money upto an aggregate sum of Rs 27000 crore outstanding at any point of time and issue Certificate of Deposits (CoDs) in more than one tranches upto an amount not exceeding Rs 3,000 Crore.

During FY 2020, transactions carried out through retail internet banking amounted to Rs. 3,802 crores.

During the second half of 2020, the Bank raised Rs. 28,000 lakh through an Initial Public Offer (IPO) and got the equity shares on BSE Limited and National Stock Exchange of India Limited listed effective from November 2, 2020.

The Board of Directors of Equitas Small Finance Bank Limited (ESFBL) and Equitas Holdings Limited (EHL) at their respective Meetings held on July 26, 2021 approved a Scheme of Amalgamation between EHL, ESFBL and their respective shareholders, contemplating amalgamation of EHL with ESFBL, which was designed to achieve the RBI licensing requirement of dilution of Promoter Shareholding in the Bank and Minimum Public Shareholding (MPS) requirements prescribed by SEBI Regulations. Subsequently, ESFBL achieved the MPS through a Qualified Institutions Placement (QIP) of its shares, in February 2022, after obtaining the necessary approvals which comprised issue of 10,26,31,087 equity shares of Rs. 10/ each at premium of Rs. 43.59 per share, aggregating to a fund raise of Rs. 550 crore utilised 100% for augmenting Tier 1 capital of the Bank during the year. As a result of this QIP, the Public Shareholding in the Bank increased from 18.70% to 25.37%, thereby complying with Minimum Public Shareholding (MPS) requirements prescribed by the SEBI Regulations. As a result, the Scheme was made effective from February 02, 2023. Pursuant to the effect of the scheme, 78,95,35,166 fully paid equity shares of Rs 10/- each were allotted to the eligible Equity shareholders of EHL as on the Record date i.e., February 03,2023 as per the share exchange ratio envisaged in the approved scheme i.e.,231 equity shares of Rs 10 each of ESFBL in respect of every 100 equity shares of Rs 10 each fully paid up held by them in EHL as consideration for transfer and vesting of undertaking of EHL in ESFBL in terms of the Scheme.