Equitas Small Finance Bank shares hit a new 52-week high in intraday trade on Wednesday after the Reserve Bank of India approved SBI Funds Management Ltd. acquisition of up to 9.99% of the bank's paid-up equity capital through SBI Mutual Fund schemes, the bank said in an exchange filing.
According to RBI regulations, any individual or entity intending to acquire more than 5% of the equity capital in a private bank must obtain prior approval from the central bank.
Earlier, in November, DSP Investment Managers Private Ltd acquired a 10 per cent stake in the bank.
The stock opened higher during the trade at ₹62 apiece compared to its previous closing price of ₹59.35; it then rose further to hit a one-year high of ₹63.90 in the early trade. However, the stock failed to hold up those initial gains. At 12:30 p.m., the stock was trading at around ₹60.30, up by 1.34% as against a 0.87% fall in the benchmark Nifty.
During Wednesday's trade, the stock recorded a volume of 12.2 million shares, both on the NSE and BSE, a 4.76-times surge over its average weekly volume of 2.6 million.
Equitas Small Finance Bank shares have surged 20% in the last nine trading sessions. The strong surge came after the bank's managing director and the chief executive officer, PN Vasudevan, withdrew his decision to step down.
In May, Vasudevan expressed his desire to move on after the process of identifying a successor was complete and had agreed to the suggestion of Chairman Arun Ramanathan to defer tendering his resignation till then, PTI reported.
After losing 25.61% of its value in May of last year, the stock has gained pace and, as of today, has returned approximately 64%. Over the last three months, the stock has risen from ₹49.85 apiece to its current position of ₹60.30, generating a return of 20.96%.
In May 2022, Equitas Holdings and Equitas Small Finance Bank (SFB) were approved by their respective boards for their merger, as per media reports.
The merger is aimed to meet the RBI's licencing 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.
According to a research report by Kotak Institutional Equities Research, Equitas SFB is well-positioned for improved return ratios and growth. "The bank is now navigating through the final few steps of the reverse-merger process, which provides an opportunity for Equitas Holdings’ shareholders to benefit from the holding company’s discount narrowing," it said.
For the September-ending quarter, the bank reported a two-fold jump in its net profit at ₹116 crore on the back of growth in loan disbursals. The bank posted a net profit of ₹41 crore in the corresponding quarter of last year.
The net interest income of the lender grew to ₹610 crore in Q2 FY23, compared to ₹484 crore in a similar quarter last year. On the asset quality side, the gross non-performing assets of the bank fell by 3.82 percent from 3.95 percent in the first quarter of FY23.
Equitas Small Finance Bank Ltd., founded in 1993, has a market capitalization of ₹7,632.5 crore. Its products and services include micro-loans against property, commercial vehicle finance lending, microfinance lending, demand deposits, time deposits, and fee-based products through its distribution of insurance and mutual fund products.
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