Equitas SFB IPO fully subscribed on day-3; QIBs bid nearly 4 times but grey market premium missing

Equitas Small Finance Bank’s Rs 518 crore initial public offering (IPO) was fully subscribed on the third and final day of bidding for the issue. With still a few hours to go before the subscription window closes the issue has received bids for 22.22 crore units as against 11.58 crore equity shares that are on offer, translating to 1.93 times subscription rate. Equitas Small Finance Bank is the ninth IPO that primary markets have seen in the last two months. Retail investors have been at the front, rushing to invest in all issues, so far oversubscribing their portion in all the recent IPOs.

Qualified Institutional Buyers (QIB) have so far subscribed their portion 3.91 times, while Retail Investors have subscribed their lot 2.05 times. However, there has been a lack of interest from non-institutional investors (NII) who have so far bid for only 22% of the portion reserved for them. Employees of Equitas Small Finance Bank have oversubscribed their lot 72% while the portion reserved for shareholders was also undersubscribed so far. 

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The issue includes an offer for sale worth Rs 237 crore and a fresh issue of equity shares worth Rs 280 crore. While the fresh issue will help the lender improve its Tier-1 capital base which will help fulfil future capital requirements, the listing will also help it follow Reserve Bank of India’s shareholding guidelines for lenders. The RBI mandates the holding company reduce its stake to 40% within five years from the commencement of business. Post the issue, promoter and promoter group shareholding will decrease to 82.1% while public shareholding will increase to 17.9%. However, the bank will explore various paths post the listing to bring promoter holding to 40% in the coming year. 

According to CRISIL, Equitas Small Finance Bank is the largest SFB (Small Finance Bank) in India in terms of number of banking outlets and has recorded the fourth lowest yields indicating diversification away from microfinance in financial year 2019. However, the grey market is not impressed. “Equitas Small Finance Bank is trading at negligible to no premium in the grey market,” Dinesh Gupta, Partner, UnlistedZone told Financial Express Online.