Equitas Holdings tanks 17% as Sebi rejects draft scheme for Small Fin Bank

Shares of Equitas Holdings slipped 17 per cent to Rs 97 on the BSE on Monday after the Securities and Exchange Board of India (Sebi) on Friday returned the draft scheme with regard to Equitas Small Finance Bank (ESFB), citing that it was not in compliance with the regulatory provisions.

The market regulator advised the company to re-submit the same after ensuring compliance with the provisions mentioned in the Sebi circular.

Following this, Equitas Holdings informed the exchanges that it would initiate necessary steps to list its shares through an initial public offer (IPO), which was expected to be completed by March 2020. READ FILING HERE

Last week, the Reserve Bank of India (RBI) refused to extend the listing deadline for ESFB and barred it from opening new branches till further orders. The directive was issued after it failed to comply with the regulatory conditions stipulated during the issuance of licence.

The company said RBI’s direction that ESFB cannot open new branches will not have implications in the short term.

"In the interest of shareholders, Equitas came up with 'Scheme of Arrangement', where in they want to capitalize the banks reserve and allot ESFB shares to holding company investors and list this on exchange. In case of unfavorable outcome resulting in IPO, that may increase holding company discount and lead to some RoE dilution as well," analysts at Antique Stock Broking said in company update report dated September 11, 2019.

Incorporated in 2005, Equitas is a Tamil Nadu-headquartered microfinance company which has been granted a small-bank license by the RBI in 2015. The company offers microfinance loans, housing loans, used commercial vehicle loans and MSE loans.

At 09:53 am, the stock of Equitas Holdings was down 15 per cent at Rs 99, as compared to 0.53 per cent decline in the S&P BSE Sensex. The trading volume on the counter more than doubled with a combined 13.2 million shares changing hands on the BSE and NSE so far.