Equitas Holdings and Equitas SFB Amalgamation

Equitas Holdings and Equitas SFB Amalgamation

by Tanushree Jaiswal Last Updated: Apr 18, 2023 - 07:48 pm 60.4k Views

The proposed amalgamation of Equitas Holding and Equitas Small Finance Bank (SFB) was already on the cards after RBI consented to reverse merger of bank holding companies after 5 years of operations. During the week, the amalgamation of Equitas Holdings and Equitas SFB was approved by their respective boards.

Merger model of Equitas Holdings and Equitas SFB

This is not a merger, but a reverse merger. Equitas Holdings is the holding company with 81.7% stake in Equitas SFB. Since Equitas SFB has the small bank license, it is Equitas Holdings that will have to merge into Equitas SFB. Under the terms of the merger, Equitas SFB will issue 226 shares to the shareholders of Equitas Holdings, for every 100 they held. 

The plan entails the "dissolution without winding-up" of Equitas Holdings after its merger with Equitas SFB. The merger is subject to regulatory approvals but should be completed by 01 November. After amalgamation, Equitas Holdings will cease to exist and Equitas SFB will be the surviving company.

Read: SFBs boosts as they can absorb the holding company

Why is the Equitas merger so important?

There are 3 reasons that this merger makes business sense.

1.   Firstly, holding companies have to reduce their stake in banks and SFBs to below 40%. This either leads to loss of control or dilution of capital. These risks can be avoided via the reverse merger route.

2.   Secondly, RBI clarified that holding companies can exit their stake in banks once it completes 5 years of operation. Holding companies are free to sell out after that.

3.    Finally, the holding company discount which is the bane of most holding companies can be avoided via this reverse merger.

The Equitas merger will set the tone for other similar structures like Ujjivan and IDFC to also go for a similar kind of arrangement. 

How do you rate this blog?


Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Tanushree is a seasoned professional with 6 years of experience in the Fintech and Edtech industry.

Open Free Demat Account
Resend OTP
Please Enter OTP
Account belongs to

By proceeding, you agree to the T&C.

Latest Blogs
Swing Trading Stocks: Week of 3 October 2023

Swing Trading Stocks for the Week

  • Sep 29, 2023
Weekly Outlook on Gold - 29 September 2023

Gold prices are facing sustained pressure despite a backdrop of dollar weakness, a rare occurrence that coincides with a decline in yields on US Treasuries. Typically, the strength of the dollar and higher yields have been key components of the Federal Reserve's hawkish monetary policy.

  • Sep 29, 2023
Weekly Market Outlook for 3 October to 6 October

The last week of September turned out to be volatile as the markets corrected during the monthly expiry to test the 19500 mark. We witnessed a strong recovery in Friday’s session, and the index finally ended the week above 19600, with marginally weekly loss.

  • Sep 29, 2023