The board of Equitas Small Finance Bank has approved a scheme of amalgamation between Equitas Holdings and Equitas Small Finance Bank.
Equitas Small Finance Bank Stock Price: Equitas Small Finance Bank, which comes under the category of Small Finance Bank, is seeing a rise today. Today this banking stock gained more than 2.5 percent to reach a price of Rs 58. Yesterday i.e. on Monday, this stock had closed at Rs 53. In fact, the board of the bank has approved a scheme of amalgamation between Equitas Holdings and Equitas Small Finance Bank. After which the sentiments regarding the stock have improved. Brokerage house Emkay Global is also considering this development as positive for the long term. The brokerage says that there are some concerns about the asset quality of the bank, but once the merger is complete, the bank will be able to apply for a universal bank license.
What is positive for the bank
Brokerage house Emkay Global says that the bank is doing well on the overall liability front. The bank has diversified its base away from Microfinance Institutions (MFIs). However, there has been some concern about the bank’s asset quality due to the COVID-19 pandemic, therefore its asset quality has weakened due to the induced shock, hence Equitas Small Finance Bank is expected to improve the portfolio quality/mix as well as improve its asset quality. There is a need to focus on creating a provisioning buffer. The brokerage believes that once the merger is complete, the bank will apply for a Universal Banking License, which is a long term positive trigger for the bank. The brokerage house has given investment advice in the stock with a target of Rs 80. In terms of current price Rs 53, it can give 50 percent return.
Recently raised capital from QIP
Equitas Small Finance Bank recently raised capital through QIP. The bank had raised funds through QIP to meet SEBI’s requirement to increase public shareholding to 25 per cent and then to get approval for amalgamation. After the SEBI approval after the Public Shareholding Norms compliance, the brokerage believes that the SEBI approval may come faster, unless there is an observation on the valuation methodology. After SEBI approval, regulatory approvals including NCLT may take 3 to 6 months. Thereafter, Equitas Small Finance Bank can apply for a Universal Banking License.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
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