Equitas Small Finance Bank (ESFBL) shares jumped more than 8% in early trading after the parent company Equitas Holdings and its subsidiary ESFBL’s boards approved their merger proposal.
Motilal Oswal, a financial services business, awarded Equitas Small Finance Bank a buy call with a target price of Rs 80, stating that the merger should eventually pave the path for a universal bank license.
Equitas Small Finance Bank’s stock soared 8.58 percent to Rs 57.55 on the BSE today, up from the previous closing of Rs 53. After falling for two days in a row, the stock has risen. Today’s opening price was Rs 55.20, up 4.15 percent. The midcap stock has been down 7.81 percent since the beginning of the year, after losing 5.43 percent in a year.
The stock is now trading above the 5-day, 20-day, and 50-day moving averages, but below the 100 and 200-day moving averages.
A total of 1.84 lakh shares of the company were traded, resulting in a Rs 1.01 crore turnover. On the BSE, the company’s market capitalization increased to Rs 6,773.47 crore. On March 7, 2022, the stock touched a 52-week low of Rs 44.75, and on July 12, 2021, it set a 52-week high of Rs 76.75. Equitas Holdings’ stock also soared in early trading. Today, the stock jumped 10.43% to Rs 119.5.
The boards of directors of both businesses authorized the merger arrangement between Equitas Holdings Ltd (transferor company) and Equitas Small Finance Bank (transferee company) at their respective meetings, the firms announced in separate stock market filings.
According to a filing, the scheme proposes the merger of Equitas Holdings into and with Equitas SFB, as well as the transferor company’s dissolution without winding up. The RBI, stock exchanges, SEBI, and the National Company Law Tribunal must all approve the merger between the two companies (NCLT).
The merger between the holding company and the subsidiary SFB is intended to meet RBI license requirements by reducing the holding company’s stake to 40% within five years of the bank’s first day of business, which is scheduled to happen on September 4, 2021.
According to Motilal Oswal, “In general, ESFB has performed well in terms of liability management while diversifying its asset base away from MFIs. However, because its asset quality has deteriorated as a result of the Covid-induced shock, ESFB must concentrate on enhancing portfolio quality/mix and bolstering provisioning buffers. We expect that after the merger is complete, ESFB will seek a universal banking license, which will be beneficial to the company in the long run.”
