Equitas SFB – Board of Directors approves proposed merger with parent company; Accretive book value: ICICI Securities
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Equitas Small Finance Bank Ltd., via its exchange filing on July 20, 2021, hinted that its board of directors had approved a plan to merge Equitas Holdings Ltd. (promoter of Equitas SFB) and Equitas SFB and their respective shareholders.
The proposed share exchange ratio (issuance of 226 Equitas Small Finance Bank shares for 100 Equitas Holding shares) is accretive to the book value for Equitas SFB.
The main rationale for the proposed merger is to meet the minimum public shareholding requirements of Equitas SFB.
In accordance with licensing guidelines, Equitas SFB is required to reduce its promoter holding more than 40% within five years of the start of operations of the small finance bank (it ends its five years in September 2021).
The promoter’s current stake is ~ 82% and upon successful completion of the merger the public stake will increase to 100% as Equitas Holding is not backed by an identifiable promoter.
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