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Equitas Small Finance Bank Ltd IPO

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Equitas Small Finance Bank Ltd is coming out with its Initial Public Offerings to meet the future capital requirement. This Chennai based Equitas Small Finance Bank (ESFB) is the largest SFB in India in terms of number of banking outlets, and second largest in terms of assets under management (AUM, 16% market share in India) and total deposits in Fiscal 2019 (Source: CRISIL Report).

It offers a range of banking products and services with a focus on serving the financially unserved and underserved customer segments in India. Its assets products include provision of small business loans comprising LAPs, housing loans, agriculture loans to micro-entrepreneurs, microfinance to JLGs, used and new commercial vehicle loans, MSE loans, corporate loans and other loans including gold loans. On the liability side, it caters to mass and mass affluent individuals to whom they offer current accounts, salary accounts, savings accounts, and a variety of deposit accounts. As of June 30 2020, its percentage of gross NPAs to gross advances was 2.68%, while percentage of net NPAs to Net Advances was 1.48%. Its Gross Advances (including securitization/ IBPC) were Rs15,573cr and deposits were Rs11,787cr as of June 30, 2020. Secured Advances constituted 75.75% of the total gross advances (including IBPC issued) as on June 30, 2020.

Issue Details

The Offer comprises of the Fresh Issue and an Offer for Sale. ESFB intends to raise fresh capital of Rs280 cr which will be utilized 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 enhanced capital base. ESFB shall not receive any proceeds from the offer for sale.

Equitas Small Finance Bank Ltd IPO Subscription Details

Company

Equitas Small Finance Bank Ltd

Issue Type

100% Book building

Issue Size (In ` Crore)

Rs.518

Lot Size

450 Equity Shares

Open Date

20 Oct

Close Date

22 Oct

Offer Price

₹32 to ₹33 per equity share

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Financials

Cr,( except percentages)

FY18

FY19

FY20

Q1 FY21

Gross Advances (including securitization / IBPC)

7,937

11,703

15,367

15,573

Total Disbursements

5,809

8,578

9,911

564

Total Assets

13,301

15,763

19,315

20,892

Total Deposits

5,604

9,007

10,788

11,787

 

 

 

 

 

Total Income

1,102

1,435

1,778

434

Net Interest Income

861

1,152

1,495

404

PAT

32

211

244

58

 

 

 

 

 

Return on average equity (%)

1.57

9.85

9.84

8.32^

Return on average assets (%)

0.30

1.45

1.39

1.15^

Cost to income ratio (%)

79.97

70.30

66.38

67.27

GNPA (%)

2.68

2.53

2.72

2.68

NNPA (%)

1.46

1.44

1.66

1.48

 

 

 

 

 

CASA Ratio (%)

29.23

25.25

20.47

19.97

Retail term deposit to total term deposit ratio (%)

16.20

24.30

44.42

46.40

Key Points

Key Positives

Customer centric organization with a deep understanding of the unserved and underserved customer segments

ESFB’s strength lies in promoting financial inclusion within customer segments that are financially unserved and underserved in India. This enables the company to comply with RBI’s requirements for SFBs including meeting “priority sector” lending requirements. As of June 30, 2020, advances to the unserved and underserved segments represented 89.12% of its Gross Advances (including IBPC issued).

ESFB has gained a deep understanding of the market over the years that enables it to meet the financing requirements of potential customers. It undertakes research on various segments within these markets to understand their borrowing profile in the absence of formal documentation.

ESFB believes that the customers prefer a single source for multiple financial services, and it has accordingly customized a range of credit and non-credit products and services to address a variety of financing requirements like small-ticket recurring deposits to promote savings with in its customer segments and distribution of insurance policies like ‘hospital daily cash benefits’, an insurance product to cover emergency medical expenses of its customers.

It also develops products to match the growth cycle of target customer base. For instance, its microfinance customers tend to require micro-LAP loans, and as their enterprises mature, will be able to obtain MSE loans/ working capital loans.

Among the largest SFBs in India with a well-diversified asset portfolio

ESFB is the largest SFB in India in terms of number of banking outlets, as of March 31, 2019, and in Fiscal 2019 they recorded the fourth lowest yields indicating diversification away from microfinance (Source: CRISIL Report). ESFB has been able to successfully diversify its loan portfolio and significantly reduce dependence on microfinance business as compared to other microfinance companies that have converted to SFBs (Source: CRISIL Report).

It assesses the track record of existing customers to advance higher credit to meet their specific financial requirements, thereby further customizing few of its products. This approach has resulted in the growth of its gross secured loan product portfolio, which has grown at a CAGR of 48.35% from Rs5,265cr as of March 31, 2018 to Rs11,585cr as of March 31, 2020, and was Rs11,797cr as of June 30, 2020. Within its credit portfolio, small business loans (including housing loan) and vehicle finance product segments recorded significant growth with a CAGR of 53.34% and 29.62%, respectively, from March 31, 2018 to March 31, 2020.

The bank believes that it is relatively insulated from counter cyclical impacts across economic cycles owing to its diversified asset base and each of its product lines is well positioned to grow, creating a foundation of stability, sustainability and scalability for our operations.

Customized credit assessment procedures for effective credit risk management

ESFB applies different credit assessment procedures based on the products they offer. For instance, sanctioning small business loans involves telephonic checks with the potential customer, followed by in-person meetings by the senior loan officer to understand the business, cash flows and other parameters based on which a proposal is prepared. The senior loan officer’s proposal is scrutinized and in certain circumstances, reassessed to check for discrepancies, if any. For vehicle loans, they also undertake inspections of the vehicle through an independent expert, to verify registration information, condition of the vehicle and market value. They additionally apply a proprietary discounted cash flow model, which is adjusted based on the income profile of the customer and type of product. It also has risk management framework to identify, measure, monitor and manage credit, market and operational risks including IT security risk.

ESFB’s risk management and credit evaluation processes, together with its ability to evaluate risk, have enabled it to contain level of NPAs, restructured standard asset and special mention accounts category 2 levels. As of June 30, 2020, Gross NPAs were 2.68% of Gross Advances (including IBPC issued), and Net NPAs were 1.48% of Net Advances.

Key Risks

The continuing impacts of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on its business, operations and future financial performance.

ESFB is subject to stringent regulatory requirement including RBI’s SFB Licensing Guidelines as per which ESFB’s Promoter Equitas Holdings Limited is required to reduce its shareholding in ESFB to 40% on or prior to Sept 4, 2021.

How to apply IPO on 5paisa app?

  • Login to your 5paisa Mobile Trading App and select Equitas Small Finance Bank Ltd IPO in the current IPO section
  • Enter the number of lots and price at which you wish to apply for
  • Enter your UPI ID and click on submit. With this, your bid will be placed with the exchange
  • You will receive a notification to block funds in your UPI app
  • Approve the block request

Equitas Small Finance Bank Ltd IPO Frequently Asked Questions

Under which categories I can apply for Equitas Small Finance Bank Ltd. IPO?

  • Retail Individuals - Applications as RII OR NII category is as per the amount mentioned in the application, i.e. < Rs.2 lacs for RII & above Rs.2 lacs is NII.
  • Employees of Equitas Holdings Ltd can apply under all 3 categories -  (a) Retail Category (any amount*)
    (b) Shareholder Category (< Rs.2 lacs)
    (c) Employee Category (< Rs.5 lacs)
  • Existing Shareholders - EHL shareholders can apply in all 3 categories. For each category a separate IPO application is required to be used.

How many Equitas Holdings shares required to eligible for the Equitas Small Finance Bank shareholders category?

Minimum 1 share of Equitas Holdings Limited (EHL) should be in your demat account on October 11, 2020, which is the cut-off date for eligibility. The IPO application should be in the name of the primary demat account holder.

How to apply for Equitas Small Finance Bank IPO?

You can apply in Equitas Small Finance Bank IPO online using either UPI OR ASBA as payment method. You can apply for Equitas Small Finance Bank IPO using any UPI ID OR you can apply using ASBA with netbanking. To know about the process in details, visit 5paisa YouTube Channel.

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Contact Details of Equitas Small Finance Bank Ltd IPO

Company Contact Information

Equitas Small Finance Bank Ltd IPO
4th Floor Spencer Plaza Pha-II,
No 769 Anna Salai (Mount Road),
Chennai, Tamil Nadu 600002.

Phone: 91-44-42995000
Email: secretarial@equitas.in
Website: https://www.equitasbank.com/

Equitas Small Finance Bank Ltd IPO Register

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Equitas Small Finance Bank Ltd IPO Lead Manager(s)

  • Edelweiss Financial Services Ltd
  • IIFL Securities Ltd
  • JM Financial Ltd

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Equitas Small Finance Bank Ltd. (Information Note)

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