The Economic Times daily newspaper is available online now.

    Equitas SFB IPO subscribed 39% on Day 1

    Synopsis

    The IPO is being sold in the price band of Rs 32-33 per share and at the upper limit of this price band, the IPO is asking for an adjusted price to book value (P/BV) of 1.26 times, post considering the fresh issue.

    EquitasiStock
    The offer included a fresh issue of shares worth Rs 280 crore and an offer for sale of 7,20,00,000 shares by the parent company.
    Mumbai: The Rs 518 crore initial public offer (IPO) by Equitas Small Finance Bank (SFB) was subscribed 39 per cent on Day 1 of the bidding process.

    So far, the IPO had received bids for 4,54,01,850 shares compared with the issue size of 11,58,50,001 shares.

    The offer included a fresh issue of shares worth Rs 280 crore and an offer for sale of 7,20,00,000 shares by the parent company. The IPO is being sold in the price band of Rs 32-33 per share and at the upper limit of this price band, the IPO is asking for an adjusted price to book value (P/BV) of 1.26 times, post considering the fresh issue.

    Emkay Global Financial Services recommended investors to subscribe to the IPO.

    The brokerage said it has a buy rating on the holding company Equitas with target price of Rs 64 for its superior asset diversification, reasonable liability profile, better management pedigree, healthy return ratios and reasonable valuations.

    The current target price for the holding company implies a per share value of Rs 40 for Equitas SFB , assuming a 40 per cent holding company discount, implying a decent upside to the issue price.

    KR Choksey said it has a long-term positive view on the stock, and recommended investors to subscribe to the issue.
    “Strong fundamental performance and adequate liquidity position provides an opportunity to grow business in future,” the brokerage said, adding that the bank is being issued at valuation of around 1.23 times P/BV at upper price band of Rs 33 as on Q1FY21.

    There were also concerns that the IPO may not lead to robust listing gains.

    According to Quantum Securities, in case of Equitas SFB, as the SME/MFI businesses face various challenges at operating level in wake of current pandemic and the interest waiver issue for which PIL (public interest litigation) has been filed in the Supreme Court (SC), listing gains look difficult.

    “So based on expectation of improvement in performance from FY22E onwards, we recommend investors to ‘Subscribe’ to the issue from a long term perspective,” Quantum Securities said in a note.

    Not all were so optimistic though.

    Angel Broking pointed that at the upper end of the price band, Equitas SFB demands adjusted P/BV of 1.26 times post considering fresh issue.

    “Though the bank has a diversified loan book and the best CASA ratio among SFBs, the return ratios are subdued with GNPA above 2.5 per cent for last 3 years. Our concern for Equitas SFB is fresh formation of bad loans from moratorium book that would keep provisions high and return ratios compressed,” said Jaikishan Parmar- sr. equity research analyst, Angel Broking.

    “We believe investors should wait for price discovery before making any investment decision,” said Parmar, recommending a neutral rating for the IPO.

    Under the offer, Qualified Institutional Buyers (QIB) will get to bid for 50 per cent of the offer, while retail investors will bid for 35 per cent of the offer, leaving Non-institutional Investors (NII) with 15 per cent of the offer to bid for. Investors can bid for a lot of 450 equity shares and multiples thereof.

    While the company earlier planned to hit the market with a Rs 1,000 crore IPO, the issue size was recently cut by nearly 50 per cent, as the company was reasonably comfortable on our capital adequacy ratio, and due to the choppy market condition, PN Vasudevan, MD & CEO of Equitas Holdings had said last week.

    Peer Ujjivan SFB, which was listed in December 2019 at a huge premium, is now trading below its issue price.
    Also, there were concerns that the IPO might list around November 2, a day before the US elections, when the market may witness a lot of volatility. Investors are also concerned over the pending Supreme Court verdict on interest waiver for the loan moratorium period.



    ( Originally published on Oct 20, 2020 )
    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in