There is a new listing on the bourses today – Equitas Small Finance Bank or Equitas SFB.
As against the IPO price of Rs.33, it got listed on the BSE at Rs.31 and currently trades at Rs.32.50.
Compared to the previous ones, this IPO had got a muted response, subscribing 1.95-times.
The HNI portion remained undersubscribed at 22%. QIBs subscribed 3.91 times and retail was 2.08 times.
The worry is about the reducing promoter stake.
Promoter Equitas Holdings currently owns 95.5% stake, which will reduce to ~ 82% post listing of the bank, which needs to be further trimmed to 40% by as early as Sep 2021, 30% by Sep 2026 and to 26% by Sep 2028. Thus, promoter stake reduction will remain a big overhang on the stock post listing, as was seen for Bandhan, Kotak in recent past.
In our New Issue Analysis, we had concluded, “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. For these very reasons, we do not recommend any arbitrage play in parent Equitas Holding as holding company discount may remain high.”