Equitas Small Finance Bank’s IPO sails through on final day
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The initial public offering of Equitas Small Finance Bank, a unit of Equitas Holdings Ltd, managed to sail through on the final day of bidding Thursday thanks to demand from retail and institutional investors as well as its employees.

The offering of 115.85 million shares, excluding the anchor allotment, was covered 1.95 times after receiving bids for 225.8 million shares, stock-exchange data showed.

The quota of shares reserved for retail investors was covered 2.08 times. Institutional investors bid for 3.91 times the portion set aside for them. The company’s employees bid for 1.83 times the shares reserved for them.

However, the issue failed to attract wealthy individuals. Non-institutional investors, which include corporate houses and high-net-worth individuals, placed orders for only 22.3% of the shares reserved for them.

The IPO had touched the one-third mark on the first day on Tuesday and crossed the two-third mark on Wednesday.

Equitas SFB’s IPO is in sharp contrast to some of the recent share sales. For instance, the IPO of Warburg Pincus-backed Computer Age Management Services Ltd was covered almost 47 times, while the share sale of Chemcon Speciality Chemicals Ltd got demand for nearly 150 times the issue size.

Similarly, JPMorgan PE fund-backed Happiest Minds Technologies Ltd’s IPO was subscribed 151 times while Route Mobile Ltd’s IPO was covered over 70 times.

The small finance bank’s IPO comprised a fresh issue of shares worth Rs 280 crore and an offer for sale of 72 million shares by parent Equitas Holdings.

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.

Chennai-based Equitas Small Finance Bank had filed a draft prospectus to float its IPO in December last year and received SEBI clearance in early March.

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 arranged and managed the share sale of Equitas SFB.

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