Equitas Holdings makes strong debut; growth outlook positive

Equitas Holdings made a strong debut on the exchanges, listing at 145.10 rupees per share on the National Stock Exchange, a 31.9% premium to the issue price of 110 rupees.

Market participants expect gains to sustain in the near term given strong growth prospects for the company, but expect a minor consolidation in the short term.

Analysts said the company had a high potential for growth as it focuses on borrowers that are overlooked by big lenders. Equitas Holdings is the first of the 10 companies that received in-principle

approval from the Reserve Bank of India to conduct an initial public offering. "Equitas is a well-established player and has a strong management team that can deliver business scalability," Motilal Oswal said in a report. "RoE (return on equity) is likely to be subdued in initial years due to

dilution and initial cost of setting up banking operations. However, it has strong growth potential and can deliver +2% RoA (return on asset)," the brokerage said.

The IPO of the company received overwhelming response, having been Subscribed 17.20 times.

The stock ended the day at Rs 135.25, up 22.95 per cent on BSE. During the day, it surged 33.63 per cent to Rs 147. The company commands a market valuation of Rs 4,535.95 crore.

The company, which finances micro and small enterprises, underserved by bigger finance companies and banks, got the 'in-principle' approval to set up small finance bank from the Reserve Bank of India in September.

The company has 18 months from the date of approval to comply with the pre-requisite norms of the RBI.

The company will use net proceeds from the IPO to invest in its subsidiaries to meet future capital requirements arising out of growth in the business. - Cogencis