Equitas SFB IPO : Subscribe or NOT?

The data has been compiled from various sources and might have small difference but overall theme is to subscribe or not — we will focus on that

Equitas Small Finance Bank– Equitas Small Finance Bank is the leader among SFBs in terms of the distribution network (With a network of 991 banking outlets across 17 states and union territories in India). Further, it is the second-largest SFB in India in terms of assets under management (AUM) and total deposits in FY19.

Offer purpose — Fresh issue of 280 cr to boost tier 1 capital plus 237 cr offer for sale

Service domains – The SFB’s product offerings include small business loans, housing loans, agriculture loans, vehicle loans and microfinance loans. On the liability side, it offers current accounts, salary accounts, savings accounts and term deposits to its customers. Besides, Equitas SFB also offers a range of third-party products, including insurance, FASTag for toll plazas and mutual fund products.

Strength –

A well-diversified asset portfolio

Large presence- It is a leader among SFBs in terms of the distribution network.

Risks —

Lower return ratio as compared to peers.

Asset Quality is poorer due to loss in vehicle finance segment. Provision coverage ratio is less

Stock will remain in overhang as promoter stake needs to be diluted to 40% in coming years

Fierce competition and concentration of customers in articular region

Future

Small finance banks are expected to grow 25% annually over next few years and IPO is priced at lower valuation compared to peers factoring lower asset quality and provisioning

Large presence and distribution network will help the bank to grow

Valuations

Seems reasonable

Should we apply?

People can avoid to subscribe

Better peers available in same segment for long term growth prospects

Listing day may see not any gains . Recommended to sell on listing day if any gains available

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