Equitas Hold­ings plans to launch IPO in April

The Pak Banker - - COMPANIES/BOSS -

Small fi­nance bank (SFB) li­cence holder Equitas Hold­ings Ltd is plan­ning to launch its ini­tial pub­lic of­fer­ing (IPO) next month, with the first week of April as the most likely time frame, ac­cord­ing to three peo­ple aware of the de­vel­op­ment.

The April IPO will make Equitas the first SFB in the coun­try to list on stock ex­changes.

"Road­shows have been go­ing on for a while now. The mar­kets too have picked up post the Union bud­get. How­ever, there are al­ready a bunch of IPOs slated for March and there are also sev­eral hol­i­days in the last week of the month. So they are look­ing at first week of April," said one of the three peo­ple cited above, re­quest­ing anonymity.

An­other SFB li­censee, Ujji­van Fi­nan­cial Ser­vices Ltd, also plans to tap the pri­mary mar­kets af­ter re­ceiv­ing reg­u­la­tory ap­proval late last month. How­ever, the com­pany is yet to fi­nal­ize the launch date, said a se­cond per­son cited above, also re­quest­ing anonymity.

E-mails sent to Equitas and Ujji­van did not elicit any re­sponse.

Chen­nai-based mi­cro­fi­nance len­der Equitas Hold­ings in­tends to raise nearly Rs.2,000 crore through the IPO, which will see sev­eral ex­ist­ing for­eign share­hold­ers trim their hold­ing as part of the Re­serve Bank of In­dia's (RBI) di­rec­tive on for­eign own­er­ship in SFBs. For­eign share­hold­ers held 93% of the equity in Equitas as on 31 March 2015, ac­cord­ing to in­for­ma­tion avail­able in the com­pany's draft IPO doc­u­ments filed in Oc­to­ber.

For­eign in­vestors that are sell­ing shares in the IPO in­clude Se­quoia Cap­i­tal, World Bank arm In­ter­na­tional Fi­nance Corp., Dutch de­vel­op­ment fi­nance in­sti­tu­tion FMO, He­lion Ven­ture Part­ners, Aav­ishkaar, In­dia Fi­nan­cial In­clu­sion Fund, West­bridge Ven­tures, Lu­men In­vest­ment Hold­ings and Aquarius In­vest­ments. Col­lec­tively, they hold a 67.53% stake in the com­pany.

RBI guide­lines for SFBs man­date for­eign share­hold­ing as per the for­eign di­rect in­vest­ment (FDI) pol­icy for pri­vate sec­tor banks.

"As per the cur­rent FDI pol­icy, the ag­gre­gate for­eign in­vest­ment in a pri­vate sec­tor bank from all sources will be al­lowed up to a max­i­mum of 74% of the paid-up cap­i­tal of the bank (au­to­matic up to 49% and ap­proval route be­yond 49%). At all times, at least 26% of the paid-up cap­i­tal will have to be held by res­i­dents," RBI said in the statu­tory guide­lines is­sued Novem­ber 2014.

Equitas' founder P.N. Vasudevan, who owns 3.17% stake in the firm, will also sell a part of his hold­ing, ac­cord­ing to the prospec­tus.

The com­pany re­ceived Se­cu­ri­ties and Ex­change Board of In­dia (Sebi) ap­proval for its IPO on 29 De­cem­ber.

Equitas had planned to raise Rs.300 crore in a pre-IPO round, but dropped the idea and will now go ahead with the IPO. "They were ear­lier look­ing to raise funds in a preIPO place­ment round and had held some dis­cus­sions. How­ever, that plan has been dropped and they are look­ing at go­ing di­rectly for the IPO," said the third per­son cited above, again on con­di­tion of anonymity.

Last month, Ujji­van raised Rs.312 crore from do­mes­tic in­vestors in a pre-IPO place­ment round to con­vert it­self to a small fi­nance bank from a mi­cro-len­der. About 33 do­mes­tic in­vestors, in­clud­ing in­sti­tu­tional in­vestors such as HDFC Stan­dard Life In­sur­ance Co. Ltd, Shri­ram Life In­sur­ance Co. Ltd and Ba­jaj Al­lianz Gen­eral In­sur­ance Co. Ltd, par­tic­i­pated in the round.

The pre-IPO place­ment was done at a price-to-book value mul­ti­ple of 2.1 times, Mint re­ported. Price-to-book value mul­ti­ple is a ra­tio used to value fi­nan­cial in­sti­tu­tions. The fund­ing round val­ued the com­pany at around Rs.2,150 crore, post money. Ujji­van had filed its draft prospec­tus with Sebi on 31 De­cem­ber and re­ceived reg­u­la­tory ap­proval last month.

Some ex­perts be­lieve that do­mes­tic in­vestors will be keen to snap up shares of­fered by th­ese firms given the strong growth the mi­cro­fi­nance sec­tor has posted in re­cent years. Cur­rently, the main­stay of a ma­jor­ity of the SFB li­censees is mi­cro­fi­nance.

"Do­mes­tic in­vestors have warmed up to the sec­tor in the re­cent years. One of the big­gest at­trac­tions is that th­ese en­ti­ties have dis­played strong top line growth, while also main­tain­ing ex­tremely low lev­els of non-per­form­ing as­sets, as com­pared to larger com­mer­cial banks," said Khushroo Pan­thaky, part­ner at au­dit­ing firm Walker Chan­diok and Co. Llp. Equitas' rev­enue in­creased 56% to Rs.755.9 crore in 2014-15 from Rs.483.5 crore in the pre­vi­ous year, data from the com­pany's draft IPO fil­ings show. Last fis­cal, the com­pany re­ported a profit of Rs.106.6 crore, an in­crease of 44% over the pre­vi­ous year's profit of Rs.74.1 crore. The com­pany dis­bursed fresh loans of Rs.3,606 crore in fis­cal 2015.

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