Ajcon global has come out with its report on Equitas Holdings IPO. The research firm has recommended to "SUBSCRIBE" the IPO in its research report as on April 04, 2016.
EHL is a diversified financial services provider focused on individuals and micro and small enterprises that are underserved by formal financing channels. Incorporated in 2007 and headquartered in Chennai, its subsidiary Equitas Micro Finance Limited is the 5th largest microfinance company in India in terms of gross loan portfolio1 as of March 31, 2015.
As of December 31, 2015 Equitas operates in 11 states, 1 union territory and the NCT of Delhi and had 539 branches across India.The company has received in-principle approval from the RBI to establish a Small Finance Bank (“SFB”) on October 7, 2015. The Company is a Non Systemically Important Core Investment Company (CIC), exempt from registration with RBI. However, in terms of SFB "In-Principle" approval, the Company is in the process of filing the application with the RBI for registering as a CIC. The IPO is purely for domestic investors in order to comply with the RBI guidelines. EHL intends to reduce foreign shareholding from 92.6% to ~35%. This is to comply with regulatory requirements of maximum 49% foreign investment in the proposed SFB.
Established player in Microfinance Industry
Credible management instills confidence in investors
Diversified product offering and markets with significant cross-selling opportunities.
Objects of the issue
The overall issue is purely for domestic investors in order to comply with the RBI guidelines. EHL intends to reduce foreign shareholding from 92.6% to ~35%. This is to comply with regulatory requirements of maximum 49% foreign investment in the proposed SFB.
At the upper end of the price band of Rs. 110, the IPO is valued at ~1.85x at FY16 Post issue P/BV which is reasonable. With due consideration to factors like a) robust corporate governance standards and transparent operations leading to institutional confidence and customer goodwill, b) comprehensive understanding and successful track record with underserved customer segment offering significant growth opportunities, c) standardized operating procedures and efficient use of technology resulting in effective risk management and improved efficiencies, d) customer and product profile has significant synergies with the SFB business and can enable access to larger customer base and enhance revenue generation & capital raising options, e) strong execution track record, f) impressive NIM and RoA with decent RoE, g) strong asset quality with NPAs under control, we recommend investors to “SUBSCRIBE” the issue .
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