Equitas Small Finance Bank IPO: Brokerage Views

This post on Equitas Small Finance Bank IPO (Equitas SFB IPO) attempts to bring out consolidated brokerage views , subscription information, Grey Market Premium (GMP) and anchor investor information where applicable. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Equitas Small Finance Bank IPO or not.

Related Posts : Equitas Small Finance Bank IPO Review

Equitas Small Finance Bank IPO: Grey Market Premium etc.

  • 20-10-20 GMP NIL

Equitas Small Finance Bank IPO (Equitas SFB IPO) : Anchor Investors

Equitas Small Finance Bank garneredEquitas raises Rs 140 crore from anchor investors. The anchor investors include Mutual funds like Invesco, Franklin India, Mirae Asset, IIFL Special Opportunities Fund etc. and insurance companies ICICI Prudential Life Insurance Company Ltd and SBI Life Insurance Co. Ltd and some other names.

Subscription: Equitas Small Finance Bank IPO ( x times)

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Day 3    

Consolidated Brokerage Views on Equitas Small Finance Bank IPO (Equitas SFB IPO)

Angel Broking :”At the upper end of the price band, Equitas SFB demands Adj. PB of 1.26x post considering fresh issue. Though the bank has diversified loan book and best CASA ratio among SFBs, the return ratios are subdued with GNPA above 2.5% for last 3 years. Our concern for Equitas SFB is fresh formation of bad loans from moratorium book that would keep provisions high and return ratios compressed. We believe invesors should wait for price discovery before making any investment decision. Considering above factors, we recommend NEUTRAL rating for the IPO”.

Capital Market : ” Score 42/100 ; Perceived higher NPA potential of Equitas’ vehicle finance book justifies lower P/Adj BV compared to Ujjivan. In terms of PE, Equitas Small Finance Bank is offered at 15.4 times, while AU Small Finance Bank is trading at 33.1 times and Ujjivan Small Finance Bank at 15.2 times. Pre-Covid, new small finance banks were fancied by markets, in preference to traditional small old private sector banks, due to their higher and faster growth potential as they cater to underserved clients. However post-Covid, this target market segment is the most challenged and faster growth by most of the small finance banks will not only be difficult but also imprudent.”

Choice Broking: ” Financial sector outlook is cautious and lending institutions except some larger ones are currently trading at
historically low valuation include IndusB at P/BV 1.1x and RBL Bank P/BV 0.8x. At higher price band of Rs33, ESFB stock is valued at P/BV of 1.2x, which is aggressively priced given the cautious business outlook. Though, valuation premium of Ujjivan SFB (P/BV of 1.7x) and AU SFB (P/BV of 5.1x) are driven by stable assets quality and double digit ROE.Considering all these parameters, we assign ‘Avoid’ rating to the issue.”

KR Choksey: Has a long-term positive view on the stock, and recommended investors to subscribe to the issue. “

SMC: “Score 2/5 ; Equitas SFB over the last few years has reduced its dependency on the Micro Finance Loans and has diversified into other products also. However, the benefit of the same still does not reflect in the financial performance, which is evident from its low ROAand ROE. Also the competitive intensity and asset quality issues are likely to persist in the medium term, in this scenario a significant improvement in the return ratios is very unlikely. In terms of valuations valuations the issue is offred at a discount to other SFBs and that keeps the downside limited for the stock, however rerating in the stock will be a function in the improvement in asset quality and Return ratios going ahead”

Quantum Securities: “As the SME/MFI businesses face various challenges at operating level in wake of current pandemic and the interest waiver issue for which PIL (public interest litigation) has been filed in the Supreme Court (SC), listing gains look difficult.”

SP Tulsiyan Website: “IPO purely to comply with listing requirement, high overhang of promoter stake sale, tremendous competition keeping outlook for smaller banks weak and aggressive pricing make this IPO a clear avoid”


Standard disclaimer: I am not a SEBI registered analyst /investment adviser and above infoimration is collated from various online sources and is for educational purpose only. Please visit indidivual brokearge sites to read the actual reports. Please donot make ypur investkent decisions based on this info as it is not completre amd exhaustive. Please do your own due diligence as stock market investments have high degree of inherent risk.

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