Things To Know Before Applying for Equitas Small Finance Bank's IPO

About the Company

Equitas Small Finance Bank Ltd was incorporated in 1993 and currently, it is the largest small finance bank in terms of the number of outlets and second-largest considering asset under management and total deposits. It being an SFB (Small Finance Bank) it serves un-served and the under-served sectors. The various loans provided by the bank include small business loans, microfinance, vehicle finance, MSE finance, corporate loans. The highest percentage of loans given are to small businesses.

Type of Loan	% of Gross Total Advances	Avg Ticket Size (₹ in thousand)	Eligible Customers
Small Business Loans	41.6%	50-2000	Self Employed Individuals (garages,farmers,dairy business etc.) includes Housing Finance
Micro Finance	23.2%	5-35	Group Loans for women - 7 to 30 members
Vehicle Finance	24.3%	Not Specified	First time formal financial channel borrowers
MSE Finance	4.6%	1000-50,000	Enterprises engaged in manufacturing and trading businesses
Corporate Loans	5.0%	1,50,000-5,00,000	Term loans to NBFC's
Others	1.4%	Not Specified	Loans against Gold, unsecured business loans etc.

About the IPO

The IPO of Equitas Small Finance Bank Ltd aims at raising INR 518 crores out of which the fresh issue is of ₹280 crores comprising 8,50,00,000 shares and for the remaining ₹237.6 crores the holding company will sell its 7,20,00,000 shares. The IPO will open for subscription on 20th October (Tuesday) and close on 22nd October (Thursday). The price band has been fixed at ₹32 to ₹33 with the minimum lot size of 450 shares. This means one has to pay at least ₹14,850 to bid for the issue.

JM Financial Ltd, Edelweiss Financial Services Ltd and IIFL Securities Ltd are the book running lead managers to the offer.

Equitas Small Finance Bank IPO Details

IPO Date	20th Oct, 2020 to 22nd Oct, 2020
Issue Type	Book Built Issue IPO
Issue Size	15,70,00,000 Eq Shares of ₹10 (aggregating up to ₹517.60 Cr)
Fresh Issue	8,50,00,000 Eq shares of ₹10 (aggregating upto ₹280 Cr)
Offer For Sale	7,20,00,000 Eq shares of ₹10 (aggregating upto ₹237.6 Cr)
Face Value	₹10 per equity share
IPO Price	₹32 to ₹33 per equity share
Market Lot	450 Shares
Min Order Quantity	450 Shares
Listing at	BSE, NSE

Equitas Small Finance Bank IPO Tentative Timetable

Bid/Offer Opens On	20th Oct, 2020
Bid/Offer Closes On	22nd Oct, 2020
Finalisation of Basis of Allotment	27th Oct, 2020
Initiation of Refunds	28th Oct, 2020
Credit of Shares to Demat Acct	29th Oct, 2020
IPO Shares Listing Date	2nd Nov, 2020

Lot Size And Price

Application	Lots	Shares	Amount
Minimum	1	450	₹14,850
Maximum	13	5850	₹1,93,050

Promoter Holding

Pre Issue Share Holding	100%
Post Issue Share Holding	82-83%

Objective of the issue:

The objective of fresh issue is to increase the bank's tier-I capital base to meet their future capital requirements such as growth and expansion. Qualified Institutional Buyers (QIB) will get to bid for 50% of the offer while retail investors will bid for 35%.

Financials:

Summary Of Financial Information

Particulars	For the year (₹ in million)
	31-Mar-20	31-Mar-19	31-Mar-18
Total Assets	1,93,145.47	1,57,626.51	1,33,011.5
Total Revenue	29,277.95	23,948.32	17,729.03
Profit After Tax	2,436.35	2,105.66	318.31

Comparison With Peers:

Company	Total Income (₹ in million for fiscal 2020)	P/E based on Dil. EPS	EPS Diluted	RoNW (%)	NAV	P/B	CMP
Equitas Small Finance Bank	29,277.95	13.81	2.39	8.92%	25.92	0.8	-
AU Small Finance Bank	49,919.76	32.91	22.32	15.45%	143.60	5.1	733
Ujjivan Small Finance	30,258.14	15.09	2.18	11.71%	17.29	1.8	31
Credit Access Grameen	17,054.80	32.54	23	12.43%	186.43	3.7	665.9

Risk Factors:

• The bank’s deposits depend on a limited number of customers and a loss of such customers could materially and adversely affect its deposit portfolio, funding sources, financial condition, results of operations and cash flows.

• The value of the bank’s collateral may decrease or it may experience delays in enforcing collateral when borrowers default on their obligations, which may result in failure to recover the expected value of collateral security exposing it to potential losses.

• The bank’s microfinance loan portfolio and unsecured business loan portfolio are not supported by any collateral that could help ensure repayment of the loan, and in the event of non-payment by a borrower of one of these loans, it may be unable to collect the unpaid balance.
  
  

Our Outlook:

We would suggest to stay away from this IPO as we are not expecting any fancy listing gains from the IPO.