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Equitas Holdings plans to list its small finance bank (SFB) by March 2020 through the IPO route. The microfinance company was earlier seeking regulatory approvals to list the subsidiary without an IPO. However, the Securities and Exchange Board of India (SEBI) has turned down the request, effectively paving way for Equitas SFB IPO.
The microfinance company had proposed to capitalize the free reserves of SFB and issue its shares to the shareholders of Equitas Holdings without cash consideration.
ESFB (Equitas SFB) will initiate necessary steps to list its shares through an IPO, which is expected to be completed by March 2020 under normal circumstancesEquitas Holdings’ filing to stock exchanges
Equitas Holdings listed in April 2016 in a blockbuster IPO after getting SFB license. However, regulations also required it to list the SFB within three years i.e. by 4 September 2019 and reduce promoters’ stake to 40%. Another guideline mandates listing of SFBs within three years of reaching a net worth of INR500 crore (INR5 billion).
The microfinance firm earlier mooted a reverse merger proposal which was also turned down by the regulator. Following this, Equitas Holdings and Equitas SFB came up with the recent proposal. Separately, the lender had informed investors that the SFB will be listed by March 2020 either through its scheme of arrangement or through an IPO.
Equitas SFB IPO: Regulators tightening noose
Meanwhile, its application seeking an extension in listing deadline for Equitas SFB was turned down by the Reserve Bank of India (RBI) earlier this month. The central bank also barred it from opening new branches till further orders and froze the pay of MD and CEO Vasudevan P N. In its communication to the bank, the RBI used harsh words to underline the fact that despite reminders, the lender had failed to meet the norms laid out for SFBs.
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Following these developments, Equitas Holdings has no option but go for Equitas SFB IPO. The regulator’s harsh stance on listing guidelines and limited time at their disposal has also affected other SFBs. As a result, there are a number of SFB IPOs lined up for 2020. These include the SFB arm of Ujjivan Financial Services, Navi-Mumbai based Suryoday SFB, and Bengaluru-based Fincare SFB.