http://www.livemint.com/Companies/tTVsCL69odjmXVCTeOdDbK/DIIs-apply-to-RBI-to-acquire-over-5-stake-in-Equitas-IPO.html
DIIs apply to RBI to acquire over 5% stake in Equitas IPO
The Chennai-based micro-finance lender intends to raise nearly 2,176 crore through the public issue that opens on 5 April.
Mumbai: The initial public offering (IPO) of small finance bank licensee Equitas Holdings Ltd is witnessing strong demand from major domestic institutional investors (DIIs).
According to several people aware of the development, around four to five DIIs have applied to the Reserve Bank of India (RBI) for the central bank’s permission to acquire more than 5% stake in the IPO.
Any investor who wants to hold more than 5% stake in any banking institution needs an approval from RBI.
“The DIIs that have applied to RBI are some of the top domestic mutual funds and insurance companies. They are expecting to receive RBI’s approval before the IPO launch, so that they can pick up the desired stake in the IPO itself,†said one of the persons cited above, requesting anonymity as he is not authorized to speak to the media.
The Chennai-based micro-finance lender intends to raise nearly Rs.2,176 crore through the public issue that opens on 5 April. The issue will close on 7 April. The company has priced its shares in the range of Rs.109-110.
At the upper end of the price band, the IPO values the company at almost Rs.3,700 crore.
“The entire allocation available for institutional investors in the IPO is around Rs.1,100 crore. Acquiring a 5% stake would entail an investment of Rs.185 crore. The fact that there are at least 4-5 DIIs that are willing to write cheques of this size, which is sufficient to cover the entire institutional book, shows the kind of demand the offer is seeing,†said another person, also requesting anonymity.
An email sent to Equitas Holdings on Friday, enquiring about the development, went unanswered.
According to a third person, the valuation of the offer is attracting DIIs in droves. “Earlier there was considerable pressure on valuations, given the new business model, limited number of domestic investor and several small finance bank licensees hitting the market at the same time. However, once some of the large DIIs indicated that they would like to pick up meaningful stakes at the current valuation, the sentiment changed significantly,†he said.
The share sale at the upper price band values Equitas at price-to-book value (PBV) multiple of about 2.2 times. PBV multiple is a ratio used to value financial institutions.
As part of the IPO, six foreign investors will  fully exit their holdings in Equitas. 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, as per information made available in the red herring prospectus.
Other foreign investors selling a part of their shares include World Bank arm International Finance Corp., Dutch development finance institution FMO and Helion Venture Partners Llc. Equitas’ founder P.N. Vasudevan, who owns 3.17% stake in the firm, will also sell a part of his holding, according to the prospectus.
Equitas’ revenue increased 56% to Rs.755.9 crore in 2014-15 from Rs.483.5 crore in the previous year, data from the company’s IPO filings show. Last fiscal, the firm reported a profit of Rs.106.6 crore, an increase of 44% over the previous year’s profit of Rs.74.1 crore. The company disbursed fresh loans of Rs.3,606 crore in fiscal year 2015.
Another small finance bank licensee Ujjivan Financial Services Ltd also plans to tap the primary markets. Ujjivan filed its draft prospectus with capital markets regulator Securities and Exchange Board of India (Sebi) on 31 December and received regulatory approval last month. The company is yet to finalize the launch date for its share sale.
So far this year, five firms have raised approximately Rs.2,385 crore through the IPO route.
Zerodha (Trading Account)
RHP
Top Contributor (300+ Posts, 200+ Likes)
