Equitas Holdings slumps after Sebi rejects draft scheme for Small Fin Bank

Equitas Holdings plunged 14.52% to Rs 100.10 after Sebi on Friday returned the draft scheme filed by the company with regard to Equitas Small Finance Bank.

Sep 16, 2019 05:09 IST capital market

The Securities and Exchange Board of India (Sebi) on 13 September 2019 returned the draft scheme filed by Equitas Holdings (EHL) with regard to Equitas Small Finance Bank (ESFB), citing that it was not in compliance with the regulatory provisions.

The market regulator advised the company to re-submit the same after ensuring compliance with the provisions mentioned in the Sebi circular.

EHL said ESFB will initiate necessary steps to list its shares through initial public offer (IPO) which is expected to be completed by March 2020 under normal circumstances.

Last week on Monday, 9 September 2019, the company had informed that the Reserve Bank of India (RBI) had declined the firms request to extend deadline for ESFB to get listed at the bourses.

As per the rules of the RBI, small finance banks, having a capital base of over Rs 500 crore, have to list within three years from commencement of operations. ESFB, therefore, had to get listed on or before 4 September 2019. Subsequent to the deadline being lapsed, an extension was requested, which was denied by the central bank.

As a punitive measure, RBI said that the bank is not permitted to open new branches till further notice and froze the remuneration of managing director and chief executive officer of the bank stands frozen at the existing level till further notice. RBI added that further restrictions may be imposed if the bank fails to make satisfactory progress towards listing of its shares.

EHL also approached Sebi with a reverse merger proposal but the regulator turned down the request.

Subsequently, the boards of EHL and ESFB approved a scheme of arrangement wherein, ESFB would capitalize its free reserves and issue shares of ESFB to the shareholders of EHL without cash consideration, in proportion to their holding in EHL. This scheme of arrangement was subject to approval from Sebi, RBI, NCLT, shareholders and creditors. ESFB had applied to Sebi for their approval of this scheme. Post such an approval, application to NCLT is required to be made for the remaining approvals. In case the scheme of arrangement does not get approved, ESFB would be taking immediate steps for an IPO and get its shares listed as soon as possible.

Shares of Equitas Holdings have plunged 13.71% to its current market price of Rs 100.10 from its close of Rs 116 on 6 September 2019.

Meanwhile, the S&P BSE Sensex was down 122 points or 0.33% to 37263.19.

On the BSE, 13.56 lakh shares were traded in the EHL counter so far compared with average daily volumes of 3.48 lakh shares in the past two weeks. The stock hit a high of Rs 111 and a low of Rs 96.65 so far during the day.

The stock hit a 52-week high of Rs 148.95 on 14 Sep 2018. The stock hit a 52-week low of Rs 78 on 26 Oct 2018.

On a consolidated basis, Equitas Holdings net profit rose 139.1% to Rs 70.27 crore on a 24.8% increase in the total income to Rs 665.04 crore in Q1 June 2019 over Q1 June 2018.

Equitas Holdings is a non-deposit taking systemically important - core investment company. The activity of the Company is making investment in subsidiary companies and providing loans to them. Equitas Small Finance Bank and Equitas Technologies are the subsidiaries of the company.

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