Equitas Holdings Ltd shares cracked as much as 12% in intra-day trade on Monday, i.e. 9 September, after the Reserve Bank of India (RBI) denied the company’s request to extend the 4 September listing deadline for its unit Equitas Small Finance Bank.
At 11:26 am, shares of Equitas Holdings were trading at Rs 106.50, down 8.2%, after hitting an intra-day low of Rs 102.15. The stock has corrected over 22% in the past one year.
According to RBI rules, small finance banks with a capital base of over Rs 500 crore have to list within three years from commencement of operations. Equitas Small Finance Bank, therefore, had to get listed on or before 4 September 2019. The company had requested an extension after the deadline lapsed, but the central bank denied it, saying it “cannot be acceded to”.
Besides, RBI has also put restrictions with immediate effect on Equitas Small Finance Bank to open new branches till further advice. The central bank has also frozen the remuneration of its managing director and CEO at the existing level.
“The RBI can put further restrictions if the bank fails to make satisfactory progress towards listing of its shares,” the central bank said in a statement.
After being denied an extension to the listing deadline by RBI, Equitas Holdings has proposed a new scheme of arrangement to list its small financing bank arm.
Under the new scheme, Equitas Holdings has proposed to capitalise free reserves of Equitas Small Finance Bank and issue shares of the subsidiary to its shareholders without cash consideration.
“The boards of EHL (Equitas Holdings) and ESFB (Equitas Small Finance Bank) had approved a Scheme of Arrangement wherein, ESFB would capitalize its free reserves and issue shares of ESFB to the shareholders of EHL without cash consideration, in proportion to their holding in EHL,” a filing by the company said.
This scheme of arrangement is subject to approval from Securities and Exchange Board of India (Sebi), RBI, National Company Law Tribunal (NCLT), shareholders and creditors.
“In case the scheme of arrangement does not get approved, ESFB would be taking immediate steps for an IPO (initial public offering) and get its shares listed as soon as possible,” EHL said in the filing.