Equitas SFB stock rises over 8% on nod to merger with Equitas Holdings

Shares of Equitas Small Finance Bank (ESFBL) rose over 8 per cent in early trade after the boards of parent Equitas Holdings and its subsidiary ESFBL cleared their merger plan.

Financial services firm Motilal Oswal said that amalgamation should ultimately pave way for a universal bank license for Equitas Small Finance Bank and assigned a buy call to the firm with a target price of Rs 80.

Equitas Small Finance Bank stock zoomed 8.58 per cent to Rs 57.55 against the previous close of Rs 53 on BSE today. The share has gained after two days of consecutive fall.  It opened 4.15 per cent higher today at Rs 55.20 The midcap stock has lost 5.43 per cent in one year and fallen 7.81% since the beginning of this year.

The stock is trading higher than 5 day, 20 day and 50 day moving averages but lower than 100 day and 200 day moving averages.

A total of 1.84 lakh shares of the firm changed hands, amounting to a turnover of Rs 1.01 crore. Market cap of the firm rose to Rs 6,773.47 crore on the BSE.

Also read: Equitas SFB, Equitas Holdings boards approve scheme of amalgamation

The stock hit a 52-week low of Rs 44.75 on March 7, 2022 and a 52-week high of Rs 76.75 on July 12, 2021.

Stock of Equitas Holdings too surged in early trade. The share zoomed 10.43 per cent to Rs 119.5 today.

The boards of directors of the two companies at their respective meetings approved the scheme of amalgamation between Equitas Holdings Ltd (transferor company) and Equitas Small Finance Bank (transferee company), the companies said in separate stock exchange filings.

The scheme proposes the amalgamation of Equitas Holdings into and with Equitas SFB and the dissolution without winding-up of the transferor company pursuant thereto, a filing said. The amalgamation between the two entities is subject to approvals from RBI, stock exchanges, SEBI as well as the National Company Law Tribunal (NCLT).

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The amalgamation between the holding company and the subsidiary SFB is directed to fulfill RBI's licensing conditions to bring down the shareholding of the holding company to 40 per cent within a period of five years from the date of commencement of business of the bank, which completed by September 4, 2021.

Motilal Oswal said, "Overall, ESFB has done very well on the liability front while diversifying its asset base away from MFIs. However, since its asset quality has weakened due to the Covid-induced shock, ESFB needs to focus on improving the portfolio quality/mix as well as building better provisioning buffers. We believe that once the merger is completed, ESFB will apply for a universal banking licence, which should be long-term positive for ESFB."