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    Equitas SFB IPO opens for subscription: Here's what analysts are saying

    Synopsis

    The Equitas IPO is not commanding much premium over the price band in the grey market, the unofficial market for trading in unlisted shares. Traders say there are concerns over the banks that deal with small borrowers.

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    “Based on expectation of improvement in performance from FY22E onwards, we recommend investors to ‘subscribe’ to the issue from a long-term perspective,” Quantum Securities said in a note.

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    NEW DELHI: The Rs 518 crore initial public offering (IPO) by Equitas Small Finance Bank (SFB) kicked off on Tuesday.

    The offer from the Equitas Holdings unit comprises fresh issue of shares worth Rs 280 crore and an offer for sale of 7,20,00,000 shares by the parent firm. The IPO is being sold in the price band of Rs 32-33 per share. At the upper limit of the price band, the issue is asking for an adjusted price to book value (P/BV) of 1.26 times after considering the fresh issue.

    Analysts are recommending a 'subscribe' rating on the issue with a long-term view.

    The IPO is not commanding much premium over the price band in the grey market, the unofficial market for trading in unlisted shares. Traders say there are concerns over the banks that deal with small borrowers.

    Peer Ujjivan SFB, which got listed in December 2019 at a huge premium, now trades below issue price. Besides, the stock might get listed around November 2, a day before the US elections, when the market may see a lot of volatility. Investors are also concerned over the pending Supreme Court verdict on interest waiver for the loan moratorium period.

    "The bank being a customer-centric organisation with deep understanding of the unserved and underserved customer segments is among the largest SFBs in India with a well-diversified asset portfolio. It also has a strong retail liability portfolio with a strategic distribution network and customised credit assessment procedures for effective credit risk management. However, looking at the current market volatility, we recommend a ‘long-term subscribe’ rating on the issue," said Astha Jain of Hem Securities.

    Equitas Small Finance Bank IPO: All you need to know

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    IPO alert

    The Rs 500 crore IPO by Equitas Small Finance Bank (ESFB) will open for subscription on Tuesday. Here's all you must know about the issue before subscribing:

    Quantum Securities said the SME/MFI businesses are facing various challenges at operating levels in the wake of the ongoing pandemic and the interest waiver issue on which the Supreme Court is hearing a PIL (public interest litigation) may rule out much listing gains.

    “Based on expectation of improvement in performance from FY22E onwards, we recommend investors to ‘subscribe’ to the issue from a long-term perspective,” Quantum Securities said in a note.

    Emkay Global Financial Services recommended investors to ‘subscribe’ to the IPO. The brokerage has a 'buy' rating on the holding company Equitas Holdings with price target of Rs 64 for its superior asset diversification, reasonable liability profile, better management pedigree, healthy return ratios and reasonable valuations. ICICI Securities also has a ‘subscribe’ rating on the issue.

    “Though the bank has a diversified loan book and the best Casa ratio among the SFBs, the return ratios are subdued with GNPA above 2.5 per cent for the last three years. Our concerns over the Equitas SFB are likely formation of fresh bad loans from the moratorium book, which may keep the provisions high and return ratios compressed,” said Jaikishan Parmar, senior equity research analyst at Angel Broking.
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    2 Comments on this Story

    WiredWorld 43 days ago
    Promotor keep minting lunching IPO and retailers keep donating money ! Is it fair to allow a single promotor to lunch multiple IPOs. Look at ICICI, SBI for example. Their return on equity is close to zero in over a decade but, the promotors have almost doubled their market capitals through multiple IPOs at exorbitant price using direct retails money and money invested through MFs. Is it fair ???
    RajTill till44 days ago
    rule 1 for cheating .. do not give relevent info .. what is the face value of share???
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