Equitas Holdings IPO review (Subscribe)

Review By Dilip Davda on Mar 31, 2016

Equitas Holdings Ltd (EHL) is a diversified financial services provider focused on individuals and micro and small enterprises (MSEs) that are underserved by formal financing channels. EHL’s customer segment includes low income groups and economically weaker individuals operating small businesses, as well as MSEs with limited access to formal financing channels on account of their informal, variable and cash-based income profile. These customers require various financial products including small, short-term business loans as well as relatively large, longer tenor enterprise and home loans. The company offers a range of financial products and services that address the specific requirements of these customer segments that take into account their income profile, nature of business and kind of security available.

To part finance needs of investments in subsidiaries like EFL, EHFL, EMFL to boost their workings and raising general corpus funds and also to provide exit to existing FII investors, the company is coming out with a combo of primary issue as well as offer for sale. While the primary offer is for Rs. 720 crore ( approx 6.54 crore equity shares), offer for sale is for 132,425,884 equity shares of Rs. 10 each that will bring approx Rs. 1455 crore for the selling investors,  thus making the aggregate size of the issue above Rs. 2175 crore. The issue is being made via book building route and the price band is fixed at Rs. 109-110. Issue opens for subscription on 05.04.16 and will close on 07.04.16. Minimum application is to be made for 135 shares and in multiples thereon, thereafter. BRLMs to the issue are Axis Capital Ltd, Edelweiss Financial Services Ltd, HSBC Securities and Capital Markets (India) Pvt Ltd and ICICI Securities Ltd. Karvy Computershare Pvt Ltd is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE. Having raised initial equity at par between 2007 and 2008, it issued further equity at Rs. 65 in 2009, at Rs. 146.20 in 2010, at Rs. 106.77 in October 2012, at Rs. 140.85 in December 2013, at Rs. 68.66 in November 2014. Before these, it also issued bonus shares in the ratio of 2 shares for every 1 share held. Post IPO, its current paid up equity capital of Rs. 269.92 crore will stand enhanced to Rs. 335 crore plus. The offer for sale consists of FII that are holding close to 93 per cent is likely to come down to around 35 per cent post IPO. As per RBI’s new guidelines, FII’s holding in micro finance sector cannot be more than 49 per cent. So now it will be of interest to see how this IPO with a FII’s dilution fares and whether fresh pack of FIIs will come forward to invest at the offered price to match permissible 49 per cent limit. As per IPO documents six foreign investors will fully exit their holdings. They are Sequoia Capital India Investments III, Aavishkaar Goodwell India Microfinance Development Co. Ltd, Aquarius Investments Ltd, MVH SpA, Lumen Investment Holdings and WestBridge Ventures II Llc. Part offloading will be done by World Bank arm International Finance Corp., Dutch development finance institution FMO and Helion Venture Partners Llc. The average acquisition cost for sellers under offer for sale is Rs. 34.98 per share.

According to the management, they have started considering NPAs after 150 days against 180 days earlier as per revised norms from RBI and have started feeling a pinch of it as its NPAs started soaring thereafter.

On performance front, for last three fiscals it has (on consolidated basis) posted total income/net profits of Rs. 283.17 cr. / Rs. 31.90 cr. (FY13), Rs. 483.51 cr. / Rs. 74.34 cr. (FY 14), Rs.755.93 cr. / Rs. 106.62 cr. (FY 15). For first nine months ended on 31.12.15 of current fiscal it has earned net profit of Rs. 120.37 crore on a total income of Rs. 794.70 crore. If we annualize these earning and attribute to fully diluted equity post IPO then the asking price is at a P/E of around 22 plus. (On standalone basis P/E stands above 109). Thus on both counts the offer is at much higher P/Es compared to its peers. The main attraction is about its small payment bank license holding and the said activities scheduled post April 2017 after merging three financing subsidiaries.  Thus it appears that the pricing discounts all near term positives.

On merchant banker’s front, they have mixed trends for their past mandates.


Conclusion / Investment Strategy

Investors looking for a medium to long term investment bet may consider investment.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Mar 31, 2016

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Equitas Holdings IPO FAQs

  1. 1. Why Equitas Holdings IPO?

    The initial public offer (IPO) of Equitas Holdings Limited offers an early investment opportunity in Equitas Holdings Limited. A stock market investor can buy Equitas Holdings IPO shares by applying in IPO before Equitas Holdings Limited shares get listed at the stock exchanges. An investor could invest in Equitas Holdings IPO for short term listing gain or a long term.

  2. 2. How is Equitas Holdings IPO?

    Read the Equitas Holdings IPO recommendations by the leading analyst and leading stock brokers.

    • Ajcon Global Services Ltd - Subscribe
    • Dilip Davda - Subscribe
    • Hem Securities - Subscribe
    • SPA Financial Advisor Ltd - Subscribe
    • Geojit Securities Ltd - Subscribe
    • ABM Equity Research Ltd - Subscribe
  3. 3. Equitas Holdings IPO what should investors do?

    Equitas Holdings IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Equitas Holdings IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Equitas Holdings IPO good?

    Our recommendation for Equitas Holdings IPO is to subscribe.

  5. 5. Is Equitas Holdings IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Equitas Holdings IPO.

  6. 6. When will Equitas Holdings IPO allotment status?

    The Equitas Holdings IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Equitas Holdings IPO allotment status to check.

  7. 7. When will Equitas Holdings IPO list?

    The Equitas Holdings IPO will list on Thursday, April 21, 2016, at BSE, NSE.

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