Equitas appoints investment banks for ESFB public issue

Equitas appoints investment banks for ESFB public issue


Mumbai: Equitas HoldingsNSE -1.29 % (EHL), the promoter of Equitas Small Finance Bank (ESFB), has appointed investment banks JM FinancialNSE -0.34 %, IIFL and Edelweiss Financials for the SFB’s proposed initial public offering of ₹1,000 crore, said three people with direct knowledge of the development.

The move comes after its request to reverse-merge the small finance bank with the listed parent to meet the regulatory requirement was rejected by market regulator Securities and Exchange Board of India (Sebi). As per a PTI report last month, Equitas Holdings (EHL) has proposed to capitalise free reserves of Equitas Small Finance Bank (ESFB) and issue shares of the subsidiary to its shareholders without cash consideration. This, too, has been turned down by the market regulator.

“The parent is looking to list the SFB by March 2020 and the initial documentation work has already begun. The bankers have been appointed,” said a person with knowledge of the development. EFSB looks to raise about ₹1,000 crore from the IPO and will use it to capitalise the small finance bank, sources said.

Last month, after the small bank failed to be listed within the stipulated timeframe as per the licence agreement, the banking regulator, Reserve Bank of India (RBI), refused to extend the listing deadline for ESFB and barred it from opening new branches till further orders. The regulator also froze the pay of CEO Vasudevan PN. RBI rules mandate that a small finance bank should list within three years of reaching ₹500-crore net worth.

Although the RBI directive does not have a major implication on the business, the bank will be forced to list by March 2020.

The spokesperson for Equitas declined to comment due to the silent period.

Within three years of starting operations in 2016, ESFB has over 600 asset branches and set up around 400 liability branches in 15 states across the country. The balance sheet of the bank stands at ₹16,997 crore as on date, the company website shows.

Small finance banks have been attracting a lot of investor interest. AU Financiers, the small finance bank, saw one of the most successful listings last year and its peer Ujjivan Finance too is looking to list in near future. The company has filed documents for a ₹1,200-crore IPO and is being valued at around ₹2,000 crore as per the pre-IPO fund raise it did with investors such as HDFC Life and Sundaram MF.