ICICI Direct also has a subscription recommendation on the stock as Equitas Small Finance Bank had strong advances growth along with it maintaining the asset quality.

The Rs 518 crore public offer of Equitas Small Finance Bank has been fully subscribed on October 22, the final day of bidding. The IPO has seen tepid response so far despite attractive valuations.


The offer has received bids for 14.38 crore equity shares against an offer size of 11.58 crore equity shares, the subscription data available on the exchanges showed. The offer size excluded anchor book, through which the company had raised Rs 140 crore on October 19.

This is the third public issue in small finance bank segment after AU Small Finance Bank and Ujjivan Small Finance Bank.

The portion set aside for qualified institutional investors has been subscribed 1.8 times, and that of non-institutional investors 7.2 percent and retail investors 1.7 times.

The bank also reserved a portion for its employees and promoter Equitas Holdings' shareholders which subscribed 1.33 times and 30 percent.

The public issue consists of a fresh issue of Rs 280 crore and an offer for sale of 7.2 crore equity shares by Equitas Holdings to comply with shareholding norms set by the Reserve Bank of India. The issue price has been fixed at Rs 32-33 per share.

As per the mandate, Equitas Holdings has to reduce its shareholding in Equitas Small Finance Bank by up to 40 percent till September 2021. Hence, Equitas Holdings could be looking for merger & acquisition and bulk stake sale, and it is also in the process of seeking principle approval from RBI for its merger with the bank.

The IPO launch has been delayed and the issue size has also been reduced to little over Rs 500 crore due to current market conditions and adequate funds with the bank.

Equitas Small Finance Bank is one of the leading small finance banks in terms of its presence and asset under management. It will utilize the net proceeds from the fresh issue towards augmenting Tier I capital base to meet its future capital requirements.

"Past good performance has built the growth drivers and provides better prospects for the bank's performance in the future," said KR Choksey which has a long-term positive view on the stock and recommends subscribe for the issue.

"The bank is being issued at a valuation of around 1.23x P/BV at the upper price band of Rs 33 as on Q1 FY21," the brokerage added.