Board of Equitas SFB approves amalgamation with Equitas Holdings

This amalgamation is being pursued to comply with the central bank’s norms on small finance banks.

Equitas Small Finance Bank Ltd, one of the S&P BSE 500 companies, announced last evening that its Board of Directors approved a scheme of amalgamation between Equitas Holdings Limited (EHL) and Equitas Small Finance Bank Limited (ESFBL) and their respective shareholders (Scheme).

The scheme pertains to the amalgamation of Equitas Holdings Limited (the transferor company) into and with Equitas Small Finance Bank Limited (the transferee company) and the dissolution without winding-up of the transferor company pursuant thereto.

This amalgamation is being pursued to comply with the central bank’s norms on small finance banks, which require the promoter (EHL in this case) to reduce the stake in the subsidiary to 40% within five years of commencement of operations by SFB. As of June 30, 2021, Equitas Holdings held an 81.75% stake in Equitas SFB.

Share exchange ratio:

After the scheme comes into effect, ESFBL, the transferee company shall, without any further application, act or deed, issue and allot to the shareholders of EHL 231 equity shares of Rs 10 each for every 100 equity shares of Rs 10 each fully paid upheld by them in the transferor company.

It should be noted that EHL has no identifiable promoter and that all its shareholders are public shareholders. With the issue of shares in the ratio mentioned above, there would be an increase of public shareholding in the Bank from 25.41% (as of date) to 100%.

In one of the recent conferences, the management said that they expect the reverse merger to be completed by December 2022.

This news came out yesterday, after market hours. Reacting to this, the shares of ESFBL and EHL were up in the pre-opening session today by 4.15% and 8.43%, respectively.

At 12.41 pm, the shares of Equitas Small Finance Bank Limited were trading at Rs 53.70, an increase of 1.32% from the previous day’s closing price of Rs 53 on BSE. The stock has a 52-week high and low of Rs 76.75 and Rs 44.75, respectively on BSE.