Equitas Holdings, Equitas SFB get board, shareholders’ nod for merger
The Board of Directors and Shareholders of Equitas Holdings Limited (EHL) and Equitas Small Finance Bank (ESFB) on Monday approved the amalgamation plan of the two companies.
As a result of the share exchange ratio, each shareholder of the transferee company, EHL, will receive 226 equity shares of the transferee company, ESFB, for every 100 shares held by them in the holding company.
EHL (Transfer Company) is the promoter or holding company of ESFB (Transfer Company).
Earlier this month, Equitas SFB got the Reserve Bank of India’s (RBI) nod to apply for promoter amalgamation with itself.
The amalgamation is intended to comply with RBI norms on small finance banks, mandating the promoter to reduce the stake in the subsidiary to 40 per cent within five years of commencement of operations by the SFB.
As of June 30, 2021, EHL held 81.75 per cent stake in Equitas Small Finance Bank (ESFB).
As per RBI conditions laid down for SFBs in June 2016 and guidelines for licensing of SFBs in the private sector in November 2014, “equity shares of SFBs to be listed on recognized stock exchange(s) in India within a time period of 3 years.” Should be done till the total assets of SFB reaches Rs.500 crores.
In case of ESFB, the applicable date for listing was September 4, 2019. However, it started its banking operations with a net worth of over Rs 500 crore.
The second condition is that if a promoter holds more than 40 per cent stake in the subsidiary, it should be brought down to 40 per cent within a period of five years from the commencement of banking operations. Here, the applicable date is September 4, 2021.
He said that the listing was awarded through an initial public official (IPO) and listing of shares of ESFB on the exchanges with effect from November 2, 2020.
According to a stock exchange filing by EHL and ESFB, “The amalgamation of EHL with ESHB and the planned issue of shares to the shareholders of EHL will also enable compliance with the minimum public shareholding requirement by ESLBL.”
The scheme envisages dissolution of EHL into ESFB and amalgamation with ESFB and “without winding up of the transferor company accordingly”.
The turnover of EHL as on March 31, 2021 was Rs 177.45 crore and total assets was Rs 1,787 crore. The turnover of ESFB was Rs 3,612.47 crore while its total assets were over Rs 24,715.22 crore.
“The consideration/share exchange ratio for the scheme is based on the valuation report issued by the registered valuer Raghuraman Krishna Iyer on July 26, 2021. The Committee of Independent Directors and the Audit Committee have also independently recommended the scheme, EHL and ESFB Said in the regulatory filing.
He said that SEBI registered merchant banker JM Financial has provided an impartial opinion on the share exchange ratio to the shareholders of the company as on July 26, 2021.
The SFB Licensing Guidelines allow a promoter to exit his/her SFB branch after completing a lock-in period of five years.
When the Scheme becomes effective, “each of the equity shareholders of the transferee company as on the record date shall, without any application or deed, be allotted 226 equity shares of Rs.10 each, in full payment of the transferee company.” Fully paid in respect of 100 equity shares of Rs.10 each held by him in the transfer company, as per the filing by him.
EHL is an RBI registered non-deposit taking systemically important core investment company. ESFB is engaged in retail banking business with focus on micro finance, commercial vehicle finance, home loans, loan against property and corporate loans as well as financing to individuals and micro and small enterprises.
EHL has two subsidiaries – ESFB and Equitas Technologies Private Limited (ETPL). The latter is engaged in the business of freight.
The due date for the scheme is November 1, 2021 or any other date as decided by the ESFB board.
The scheme is subject to the approval of RBI, SEBI, stock exchanges, NCLT as well as public shareholders and creditors of EHL and ESFBL.
.