Equitas Holdings Limited, an Indian microfinance lender, recently opened its primary market sale. The initial public offering generated INR 7.2 billion (USD 108 million) in newly issued shares. Furthermore, it had already acquired INR 6.5 billion (USD 98 million) from anchor investors ahead of the IPO.
Total demand for the IPO was INR 260 billion (USD 3.9 billion), 17 times the amount of shares on offer. The IPO was oversubscribed 57 times in the high net worth individual category, 15 times in the institutional investor segment, and 1.3 times in the retail category. The valuation of Equitas at the IPO price of INR 110 (USD 1.65) was 1.7 times its estimated 2017 book value, which is lower than peers such as SKS Microfinance (3.3) and Cholamandalam Investment (3.8).
Before the IPO, foreign institutional investors (FIIs) owned 93 percent of Equitas. During the primary market period, the reserve bank of India did not allow them to participate due to a ceiling of 49 percent on FII ownership of publicly traded firms. After the IPO, FII shareholding in Equitas stands at 35 percent. Foreign investors that sold their shares in the IPO were Aavishkaar, Aquarius Investments, CreditAccess Asia, Helion Venture Partners, India Financial Inclusion Fund, International Finance Corporation, Lumen Investment Holdings, Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden, Sequoia Capital and Westbridge Ventures. For example, CreditAccess Asia generated proceeds of EUR 25 million (USD 28 million) from the IPO sale.
During the first day of secondary market trading, shares exceeded the issue price of INR 110 per share, with a high of INR 147 and a low of INR 134. In total INR 23 billion (USD 350 million) of stock changed hands on the National Stock Exchange and Bombay Stock Exchange.
Equitas plans to use the IPO proceeds to enhance the capital base of its microfinance, vehicle finance and housing finance units. Furthermore, it will seek to merge the units as part of a transformation from a microfinance lender to a small finance bank which it may do under the license it got from the RBI on September 26, 2015 [4].
As of March 2016, Equitas reported total assets of INR 40.1 billion (USD 600 million) and 2.7 million clients. As of the same date, it reported an annual profit of INR 10.6 billion (USD 160 million). As of March 2015, Equitas reported return on assets of 3.64 percent and return on equity of 19.84 percent.
By Kevin van den Brink, Research Associate
About Equitas Holdings Limited
Equitas Micro Finance is a microfinance institution (MFI), that was created in December 2007 and got a small banking license from the Reserve Bank of India in September 2015, is based in Chennai, India. The objective of the company is to make credit available at a “reasonable” cost and in a transparent manner to the underbanked population of India. Equitas is active in seven states and union territories in India: Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Puducherry, Rajasthan and Tamil Nadu. Equitas Micro Finance is a unit of Equitas Holdings, which also controls Equitas Vehicle Finance and Equitas Housing Finance. On the 5th of April 2016, Equitas Holdings raised INR 22 billion (USD 330 million) through an IPO. As of March 2016, Equitas reported total assets of INR 40.1 billion (USD 600 million) and a total client base of 2.7 million users for its microfinance business. As of the same date, it reported a profit of INR 10.6 billion (USD 160 million).
Sources and Additional Resources
[1] Chittorgarh, IPO List, “Equitas Holdings Limited IPO Detail”,
[2] SmartInvestor, Market News, “On its first day, Equitas stock settles 23% above listing price”
[3] Livemint, News, “Equitas to launch IPO on 5 April”
[4] MicroCapital, Brief, “Reserve Bank of India (RBI) Awards Small Bank Finance Licenses to 10 Microfinance Institutions (MFIs)”
MicroCapital Universe Profile: Equitas Holdings Limited
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