The Promoter of Equitas Small Finance Bank (ESFB) i.e. Equitas Holdings Limited (EHL) was granted the RBI Final Approval on June 30, 2016, to establish a Small Finance Bank (SFB). Subsequently, the Bank was converted to a SFB and it commenced operations on September 05, 2016.
Market outlook and valuation: At the upper end of the price band, Equitas SFB demands Adj. PB of 1.26x post considering fresh issue. Though the bank has a diversified loan book and best CASA ratio among SFBs, the return ratios are subdued with GNPA above 2.5% for the last 3 years. Our concern for Equitas SFB is fresh formation of bad loans from moratorium books that would keep provisions high and return ratios compressed. We believe investors should wait for price discovery before making any investment decision. Considering above factors, we recommend NEUTRAL rating for the IPO.

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