The initial public offering of Equitas Small Finance Bank, a unit of Equitas Holdings Ltd, crossed the one-third mark on the first day of the issue on Tuesday led by retail investors and company employees.
However, institutional investors and high-net-worth individuals (HNIs) remained on the sidelines.
The offering of 115.85 million shares, excluding the anchor allotment, was covered 39.19% after receiving bids for 45.4 million shares, stock-exchange data showed.
The portion of shares reserved for retail investors was covered nearly 85% while that for employees was subscribed 59%.
Institutional investors didn’t bid for a single share. Non-institutional investors’ category, comprising corporate bodies and wealthy investors, was covered nearly 3%.
Ahead of the IPO, the lender raised Rs 139.68 crore ($19.05 million at current exchange rates) from a bunch of anchor investors on Monday. It allotted about 42.32 million shares at the upper end of the Rs 32-33 price band to a dozen institutional investors mainly comprising domestic mutual funds and insurers, a stock-exchange filing showed.
IIFL’s Special Opportunities Fund (Series 4), which makes public market or pre-IPO bets, bought shares worth Rs 12.5 crore. TT International, a long-term investment fund, put in Rs 7.5 crore through its Asia Pacific Equity Fund. Australian retirement fund Mine Superannuation Fund bought shares worth Rs 5.01 crore.
Six Indian MFs acquired Equitas SFB’s shares through a total of 27 schemes. These asset managers are ICICI Prudential MF, Sundaram MF, Nippon Life India, Franklin India MF, Mirae Asset and Invesco MF.
HDFC Life Insurance Co and SBI Life Insurance Co were the Indian insurers that participated in the anchor allotment.
Anchor investors, also known as cornerstone investors, are institutions that accept a one-month lock-in for a sizeable allocation of shares. Their participation highlights investors’ confidence in an IPO and sets a benchmark for the investor community at large.
Equitas SFB is seeking a valuation of Rs 3,756 crore ($512 million at current exchange rates) via the IPO, which closes on Thursday.
The IPO comprises a fresh issue of shares worth Rs 280 crore and an offer for sale of 72 million shares by parent Equitas Holdings Ltd. The bank trimmed the issue size after the Securities and Exchange Board of India in April allowed companies to tweak their IPO size by up to 50% in the wake of the Covid-19 pandemic.
The total IPO size is now pegged at Rs 517.60 crore at the upper end of the price band. The offer will result in roughly 13.78% stake dilution on a post-issue basis. Equitas Holdings’ stake will dilute to about 82% after the issue from 95.49%. It will get three years to pare its stake to 75% or below as per the Securities and Exchange Board of India’s minimum public shareholding guidelines for listed companies.
As per the Reserve Bank of India’s bank licensing conditions, Equitas Holdings is also required to pare its stake in the small finance bank from 100% to 40% by September 2021.
Equitas SFB is the largest small finance bank by banking outlets, and second-largest by assets and deposits. It will use the fresh net proceeds from the IPO to augment its Tier-1 capital base to meet its future capital requirements for expansion and meeting regulatory requirements.
An IPO and a stock-market listing is imperative to the bank’s operations. In September last year, the RBI had barred the bank from opening new branches for missing its listing deadline, a key licensing condition. The RBI had warned the lender that it might impose more restrictions if it failed to make “satisfactory progress” towards listing its shares.
Equitas SFB will join Ujjivan SFB and PE-backed AU Small Finance Bank Ltd in going public. Ujjivan SFB went public last year with a strong investor turnout and bumper listing. AU Small Finance Bank floated its IPO in 2017.
Equitas Holdings had listed its shares in April 2016, followed by Ujjivan SFB parent Ujjivan Financial Services Ltd.
JM Financial, Edelweiss Financial Services and IIFL Securities are the merchant bankers that are part of the syndicate arranging the share sale of Equitas SFB.