Equitas Small Finance Bank reverse merger to improve its asset quality and credit growth

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The reverse merger of Equitas Holding and Equitas Small Finance Bank will help the SFB to work on improving its asset quality and credit growth, said analysts.

Kotak Institutional Equities Research in a report said that the SFB is well positioned for an improvement in return ratios and growth. “The bank is now navigating through the final few steps of the reverse-merger process, which provides an opportunity for Equitas Holdings’ shareholders to benefit from the holding company’s discount narrowing,” the report said.

For the reverse-merger, the bank had announced a revised share swap ratio of 100:231.

“As the bank moves closer to the finalization of the reverse merger, the holding company discount is expected to narrow from the current level of ~22 per cent. This provides an opportunity for the shareholders of the holding company to benefit in the short term, assuming the amalgamation process is successful in the currently proposed format,” the report added.

Equitas SFB recently announced that it has a hearing scheduled with the National Company Law Tribunal on December 21, 2022. The management has indicated that it expects to complete the amalgamation process around January 2023.

The merger was nearing completion after the Reserve Bank of India (RBI) consented to the reverse merger of bank holding companies after five years of operations, when the official process began