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Equitas Holdings
First small finance bank to get listed
Equitas Holdings, incorporated on June 22, 2007, is a Chennai-based diversified financial services provider focused on individuals and micro and small enterprises (MSEs) that are underserved by formal financing channels. Equitas offers a range of financial products and services through its wholly owned subsidiaries in four segments such as microfinance (Equitas Microfinance), Vehicle Finance and MSE Finance (Equitas Finance) and Housing Finance (Equitas Housing Finance).

P N Vasudevan, the founder of the company, is the Director of the company since inception and Managing Director since 26 July 2007. S. Bhaskar joined Equitas group on 15 October 2007 as the Chief Financial Officer. H.K.N. Raghavan is the Chief Executive Officer of Equitas Micro Finance, who has joined Equitas group on 08 December 2008. V.S. Murthy is the Chief Executive Officer of Equitas Finance, who has joined Equitas group on 10 November 2010. E. Varathkanth is the National Business Head of Equitas Housing Finance Ltd, who has joined Equitas group on 09 July 2008.

As of 31 December 2015, Equitas had operations spread across 11 states, one Union territory and the NCT of Delhi with 539 branches across India. Equitas Microfinance is the 5th largest microfinance company in India in terms of gross loan portfolio.

Equitas had applied for Small Finance Bank (SFB) license with the Reserve Bank of India (RBI) and on 07 October 2015 received an in-principle approval for the establishment of an SFB.

Equitas Holdings's outstanding loan portfolio had grown at a CAGR of 50% from Rs 793.90 crore as of 31 March 2011 to Rs 4009.88 crore as of 31 March 2015. Its outstanding loan portfolio as of 31 December 2015 was Rs 5505.19 crore, 37% over March 2015. Microfinance loans constituted 53.3%, vehicle finance 25.5%, SME finance 17% and Housing Finance 4.2% at end 31 December 2015.

The total debt of the company stood at Rs 4154.88 crore at end December 2015. Banks and financial institutions accounted for 73.9% of the total debt, while debentures accounted for rest of the debt.

As of December 31, 2015, the capital adequacy ratio (CAR) of Equitas Microfinance and Equitas Finance was 21.02% and 31.45%, respectively, compared to the RBI-mandated CAR requirement of 15.00%. The CAR of Equitas Housing was 32.11% as compared to the applicable regulatory requirement of 12.00%.

As of March 2013, 2014 and 2015 and as of December 2015, gross NPAs as a percentage of on-book AUM was 0.27%, 0.73%, 1.08% and 1.33%, respectively, while net NPAs as a percentage of On-book AUM was 0.18%, 0.61%, 0.80% and 0.97%, respectively.

Microfinance: The microfinance business provides loans ranging approximately between Rs 2,000 and Rs 35,000 to customers, depending on the loan cycle and mode of disbursement. As of March 2015, Equitas Microfinance was the fifth largest microfinance company in India in terms of gross loan portfolio. The microfinance business' AUM increased at a CAGR of 43.60% from Rs 723.97 crore as of March 2012 to Rs 2143.95 crore as of March 2015, and increased to Rs 2934.80 crore as of December 2015, which represented 53.31% of the aggregate AUM. As of December 2015, there were 2.78 million loan accounts in microfinance business.

Vehicle Finance: Used commercial vehicle finance customers are typically first-time formal financial channel borrowers purchasing commercial vehicles. The vehicle finance business' AUM increased at a CAGR of 96.46% from Rs 304.52 crore as of March 2013 to Rs 1175.41 million as of March 2015, and increased to Rs 1405.63 crore as of December 2015, which represented 25.53% of the aggregate AUM. As of December 2015, there were 52,274 loan accounts in the vehicle finance business.

Micro and Small Enterprise (MSE) Finance: Asset-backed financing is done primarily focused on self-employed individuals operating micro enterprises and small enterprises, typically in urban and semi-urban locations. The MSE finance business AUM increased from Rs 87.43 crore as of March 2014 to Rs 510.99 crore as of March 2015, and moved up to Rs 935.52 crore as of December 2015, which represented 16.99% of the aggregate AUM. As of December 31, 2015, there were 45,992 loan accounts in the MSE finance business.

Housing Finance: Focus is on providing micro-housing and affordable-housing loans to self- employed individuals who have limited access to loans from banks and larger housing finance companies. The housing finance business AUM increased at a CAGR of 100.54% from Rs 44.64 crore as of March 2013 to Rs 179.53 crore as of March 2015, and increased to Rs 229.25 crore as of December 2015, which represented 4.16 % of the aggregate AUM. As of December 2015, there were 4,022 loan accounts in housing finance business.

Small Finance Bank: The company had applied for SFB license under the applicable guidelines and on 07 October 2015. The RBI granted us in-principle approval to establish an SFB. Pursuant to the SFB in-principle approval, certain of subsidiaries, namely, Equitas Microfinance and Equitas Housing Finance, are in the process of being amalgamated with Equitas Finance to form the proposed SFB. The merger scheme has been approved by the RBI and by the NHB pursuant to letters dated 22 January 2016 and 20 January 2016, respectively.

The Offer and the Objects

The company is coming out with an IPO to collect around Rs 2163 crore at the lower band of Rs 109 per share (face value Rs 10 per share) and Rs 2177 crore at the upper band of Rs 110 per share consisting of a fresh issue of equity shares (6.545-6.605 crore share) aggregating to Rs 720 crore and offer for sale of 132,425,884 equity shares.

The offer for sale includes sales of equity share of up to 16,463,772 equity shares by International Finance Corporation (IFC), up to 11,926,668 equity shares by Nederlandse Financierings - Maatschappij Voor Ontwikkelingslanden NV (FMO) (IFC and FMO collectively referred to as the DFI selling shareholders), up to 4,999,998 equity shares by Aavishkaar Goodwell India Microfinance Development Company (Aavishkaar), up to 7,153,038 equity shares by aquarius investments ltd. (Aquarius), up to 868,125 equity shares by Creation Investments Equitas Holdings, Llc (creation), up to 4,288,648 equity shares by helion venture partners II LLc (Helion), up to 25,938,594 equity shares by india financial inclusion fund (ifif), up to 22,571,820 equity shares by lumen investment holdings limited (Lumen), up to 16,975,484 equity shares by mvh s.p.a. (mvh), up to 6,635,770 equity shares by sarva capital llc (Sarva), up to 12,840,861 equity shares by Sequoia Capital India Investments III (Sequoia), up to 1,583,106 equity shares by Westbridge Ventures II, Llc (Westbridge) (Aavishkaar, aquarius, creation, helion, ifif, lumen, mvh, sarva, Sequoia and westbridge collectively referred to as the pe selling shareholders), and up to 180,000 equity shares by P N Vasudevan (individual selling shareholder).

The issue is to be made through a book building process and will open on 05 April 2016 and will close on 07 April 2016.

Post-issue, the foreign shareholding of the company will decline from 93% to 35%. Once, the company converts into a SFB, the limit on foreign shareholding is placed at 49%, which still provide sufficient room for FIIs participation post listing.

The company proposes to utilize Rs 616 crore from the Net Proceeds towards investment in its subsidiaries to augment their capital base to meet their future financial capital requirements arising out of growth in the business. The investment is proposed to be undertaken by way of subscription to the equity shares of the subsidiaries up to Rs 288 crore in Equitas Microfinance, Rs 288 crore in Equitas Finance and Rs 40 crore in Equitas Housing Finance.


The company follows strict corporate governance standards and is committed to transparent operations and has been able to attract many reputed investors.

Comprehensive understanding and successful track record with underserved customer segment offering significant growth opportunities. In addition, the company's customer-oriented product structure and operations enable to develop customer loyalty and maintain asset quality.

Standardized operating procedures and efficient use of technology resulting in effective risk management and improved efficiencies.

Strong branch network of 539 branches across India. The microfinance arm of the company is the fifth largest microfinance company in India.

Experienced management and strong employee engagement with employee base of 8000 staff.

Equitas is among the ten winners of SFB license from the RBI. On the asset side, conversion to a small bank could help MFIs/HFCs to diversify their product mix, which is restricted at present.


The conversion to SFB poses challenges such as increase in overall funding requirement to meet CRR and SLR requirements. Further, access to institutional funding sources may be limited and regulatory restrictions on interbank lending could limit the funding availability from banks.

The negative carry-on CRR and SLR is likely to bring down the net interest margins of the SFB and higher operating expenses on account of introduction of new products, cost of deposit mobilization, recruitment and trainings, upgradation of systems and branch infrastructure and could lead to losses/single digit return on equity in initial years.

Regulations related to SFBs are still evolving.

The company does not have operating history in the banking business and is subject to all of the business risks and uncertainties associated with setting up a new business in general, and with banking operations in particular.

Market acceptance of the Equitas brand is critical to banking business.

Loans to the underserved sections of the population involve relatively higher risk and high operational costs.

The business is heavily dependent on operations in the southern states of India, particularly the state of Tamil Nadu, and any adverse changes in the conditions affecting these markets can adversely impact our business, financial condition and results of operations.


Equitas Holdings's annualized consolidated EPS for 9M FY 2016 on post-issue equity works out to Rs 4.79. At the price band of Rs 109 to Rs 110 P/E works out to 22.8 to 23 times.

Current consolidated book value of Equitas Holding is Rs 48. Post-issue consolidated Book Value works out to Rs 59.92 at issue price of 109 and Rs 60.04 at issue price of Rs 110. P/BV at both the bands works out to be 1.8 times.

Equitas will be the first proposed SFB to be listed and hence no comparable listed player is available. There are nine other players who have won in-principle approval to set up SFBs and may get listed in future.

Equitas Holdings : Issue highlights
For Fresh Issue Offer size (in no of shares)
- On lower price band6.61 crore
- On upper price band6.54 crore
Offer size (in Rs crore)720
For Offer for Sale Offer size (in Rs crore)
- On lower price band1443.16
- On upper price band1456.40
Offer size (in no. of shares)13.24 crore
Price band (Rs)*109-110
Post issue capital (Rs crore)
- On upper price band335.32
- On lower price band336.02
Post-issue promoter & Group shareholding (%)0.0
Issue open date5/4/2016
Issue closed date7/4/2016
ListingBSE, NSE

Equitas Holdings: Consolidated Financials

Particulars1103 (12)1203 (12)1303 (12)1403 (12)1503 (12)1512 (09)
Income from Operations238.81198.06282.15482.43755.06791.35
Other Income0.390.591.021.090.863.35
Total Income239.20198.65283.17483.52755.93794.70
Interest Expenses68.8364.21107.63189.52294.70308.27
Other Expenses93.80111.40119.03155.60238.81245.06
Gross Profit76.5823.0356.51138.39222.42241.37
Provisions and Contingencies27.694.998.9118.3950.4344.50
Restatement Adjustments 0.000.88-0.880.000.000.00
Profit before Tax 44.0411.6639.76113.81163.56187.22
Provision for Tax15.5214.367.8739.4956.5766.85
Profit after Tax 28.52-2.6931.9074.32106.99120.37
Profit/ (Loss) after tax from discontinuing operations 0.00-0.780.000.02-0.360.00
Profit / (Loss) -TOTAL OPERATIONS 28.52-3.4731.9074.34106.63120.37
* Annualized on post issue equity of Rs 335.32 crore, Face value Rs 10/- Figures in Rs crore Source: Capitaline Databases

 Equitas Holdings: Consolidated Track Record

201103 (12)201203 (12)201303 (12)201403 (12)201503 (12)201512 (09)
On-Book AUM 626.80616.011213.492123.163464.625013.88
Off-Book AUM167.10207.88270.33362.49545.26491.31
AUM Growth (%) NA 3.78%80.10%67.52%61.32%37.29%
Total Loan Accounts143040612446301440201196572925166472884435
Interest Income222.01181.07254.59435.53686.81723.14
Other Income17.1917.5828.5847.9969.1171.56
Total Income239.20198.65283.17483.52755.93794.70
Interest Expense68.8364.21107.63189.52294.70308.27
Net Interest Income153.18116.85146.96246.01392.11414.87
Operating Expense98.65118.66125.99161.80247.24254.71
Cost of Funds(%)*13.45%11.11%11.71%12.14%12.07%11.44%
Credit Cost27.694.998.9118.3950.4344.50
Net Interest Margin (%)*21.90%14.45%12.74%12.40%12.07%11.63%
Operating Expense / Average AUM (%) *14.10%14.67%10.92%8.15%7.61%7.14%
Gross NPA 4.237.323.3315.5137.4366.92
Gross NPA / On-Book AUM %0.68%1.19%0.27%0.73%1.08%1.33%
Net NPAs 2.470.762.2012.9727.8348.87
Net NPAs / On-Book AUM %0.39%0.12%0.18%0.61%0.80%0.97%
Number of branches 281334365432505539
Number of employees 249227163148447762758067
Number of loan accounts 143040612446301440201196572925166472884435
Net Profit 28.52-3.4731.9074.34106.63120.37
Average Total Assets860.14963.971407.382302.753608.215130.75
Average Net Worth286.71302.03387.10606.80956.151231.75
Total Debt591.88563.791274.371849.163032.184154.88
Return on Average Assets (%) *3.32%-0.36%2.27%3.23%2.96%3.13%
Return on Average Net Worth (%)*9.95%-1.15%8.24%12.25%11.15%13.03%
Average Debt / Average Net Worth1.781.912.372.572.552.92
Average Net Worth as a percentage of Average Total Assets 33.33%31.33%27.50%26.35%26.50%24.01%
Earnings Per Share (pre issue)2.18-
Book Value Per Share (pre issue)67.9368.0381.7102.1343.5447.98
Figures in Rs crore *Figures are Annualized Source: Capitaline Databases

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