Equitas Small Finance Bank IPO

Equitas Small Finance Bank IPO Details

Equitas Small Finance Bank IPO Tentative Timetable

About the Company – Equitas Small Finance Bank 

Equitas Small Finance Bank the largest Small Finance Bank (SFB) in India in terms of the number of outlets and the second-largest in terms of total deposits and assets under management.

Equitas SFB offers a range of banking products/services focused on the financially unserved and underserved customer segments in India. The Equitas Group launched operations in India as a Non-Banking Financial Corporation (NBFC) in 2007 offering microfinance loans through Equitas Micro Finance Limited (EMFL). In 2011, it started offering housing loans through Equitas Housing Finance Limited (EHFL) and vehicle finance and MSE finance since 2012.

Equitas SFB focuses on individuals with limited access to formal financing channels due to the cash-based or informal nature of their income. The bank has designed products to suit customers with different profiles. On the liability side, the bank primarily has mass and mass-affluent individuals having savings, current, salary, and deposit accounts. Equitas SFB also offers debit cards, mutual funds, third-party insurance, and issues FASTags.

1. Strengths of Equitas Small Finance Bank 

• Equitas SFB is a customer-centric organization with a deep understanding of the unserved and underserved customer segments
• It is among the largest SFBs in India with a well-diversified asset portfolio
• A strong retail liability portfolio with a strategic distribution network
• Customized credit assessment procedures for effective credit risk management
• Equitas leverages technology to drive operating procedures
• Professional management, experienced leadership, and trained employee base

2. Objects of the Offer

Equitas Small Finance Bank Limited proposes to utilize the net proceeds from this issue towards boosting its Tier I capital base to meet its future capital requirements.

3. Risk Factors

• The continuing impacts of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on the bank’s business, operations, and future financial performance. 
• The bank is subject to stringent regulatory requirements and prudential norms and its inability to comply with such laws, regulations and norms may have an adverse effect on its business, results of operations, financial condition and cash flows.
• The business of Equitas SFB is vulnerable to interest rate risk, and any volatility in interest rates or inability to manage interest rate risk could adversely affect its net interest margins, income from treasury operations, business, financial condition, results of operations and cash flows.
• Equitas has a limited operating history as an SFB and its future financial and operational performance cannot be evaluated on account of its evolving and growing scale of operations. Accordingly, its future results may not be reflective of our past performance.
• Any adverse developments in the segments that the bank operates in, including small business loans, microfinance and vehicle finance could adversely affect its business and results of operations.
• Banking companies in India, are currently required to prepare financial statements as per Indian GAAP. However, the promoter of Equitas SFB, Equitas Holdings Limited (EHL), currently prepares its financial statements under Indian Accounting Standard (Ind AS) and as a result, it is required to prepare limited financial information in accordance with the accounting policies of EHL for the limited purposes of consolidation by EHL. Differences exist between Ind AS and Indian GAAP, which may be material to investors’ assessment of the bank’s financial condition. Ind AS financial information that it may be required to prepare in the future will not be comparable to the financial information it currently prepares in accordance with the accounting policies of EHL for the limited purpose of consolidation of EHL’s financials.
• We have a continuous requirement of funds and the bank’s inability to access sources of funds in an acceptable and timely manner or any disruption in the access to funds would adversely impact its results of operations, financial condition and cash flows.
• A significant portion of the bank’s advances are towards customers located in the State of Tamil Nadu and any adverse changes in the conditions affecting the region can adversely impact its business, financial condition, results of operations and cash flows.
• 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.
• The bank has significant exposure to loans against property. It may not be able to realize the expected value of the collateral on loans due to fluctuating real estate prices and/ or enforce the security in a timely manner or at all in the event of default and this may have a material adverse effect on its business, results of operations, financial condition and cash flows.

Important information about Equitas Small Finance Bank 

Here is a quick look at some important information about Equitas Small Finance Bank:

1. Overview of Equitas Small Finance Bank’s financials

All amounts in INR Crore

2. Promoters of Equitas Small Finance Bank IPO

1. Equitas Holdings Limited (EHL)

Summing Up

Equitas Small Finance Bank has posted strong growth in revenues over the last three years. Being one of the largest SFBs in India, many investors are looking forward to the launch date to become a part of its growth story. Before you invest, ensure that you read through the company’s financials and the Red Herring Prospectus (RHP) carefully. 

Happy Investing!