Equitas Holdings Slumps 18% as Draft Scheme for Small Finance Bank Fails to Get SEBI Nod

Equitas Holdings Ltd shares slumped nearly 18% in intra-day trade on Monday, i.e. 16 September, after market regulator Securities and Exchange Board of India (Sebi) returned the draft scheme with regard to Equitas Small Finance Bank.

At 11:11 am, shares of Equitas Holdings were trading at Rs 100.35, down 14.3%, after hitting an intra-day low of Rs 96.25. The stock has fallen nearly 19% in the last one year.

Equitas Holdings had filled a draft scheme of arrangement between the company and Equitas Small Finance Bank along with other documents. However, Sebi returned the draft scheme saying it was not in compliance with the regulatory provisions. The company has now been advised to re-submit the same after ensuring compliance with the provisions mentioned in the Sebi circular.

“The draft scheme is not in compliance with clause 111(A)(1)(a) of Annexure I of the said circular. Sebi has returned the draft scheme and the company is advised to re-submit the same after ensuring compliance with the provisions mentioned in the Sebi circular,” Equitas Holdings said in release.

After Sebi’s response, Equitas Holdings informed the exchanges that it would initiate necessary steps to list its shares through an initial public offer (IPO), which is expected to be completed by March 2020 under normal circumstances.

The company was in news last week when the Reserve Bank of India (RBI) had denied its request to extend the 4 September listing deadline for Equitas Small Finance Bank.

According to RBI rules, small finance banks with a capital base of over Rs 500 crore have to list within three years from commencement of operations. Equitas Small Finance Bank, therefore, had to get listed on or before 4 September 2019. The company had requested an extension after the deadline lapsed, but the central bank denied it, saying it “cannot be acceded to”.

After being denied the extension, Equitas Holdings had proposed a new scheme of arrangement to list its small financing bank arm, which has now been rejected by Sebi. Under the new scheme, Equitas Holdings had proposed to capitalise free reserves of Equitas Small Finance Bank and issue shares of the subsidiary to its shareholders without cash consideration.