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Equitas Holdings Limited IPO - Sushil Finance

Posted On: 2016-04-04 23:17:48

COMPANY OVERVIEW

Incorporated in June 2007, Equitas Holdings Ltd. is Chennai based financial services provider focused on individuals and micro and small enterprises (MSEs). Equitas offers services to low income groups and economically weaker individuals operating small businesses and MSEs with limited access to formal financing channels.

Equitas is one of the 10 companies that have been selected by the RBI to set up small finance banks, niche lenders aimed at helping small businesses and farmers get easier access to funding.

Equitas operates in 11 states, one union territory and the NCT of Delhi. As of June 30, 2015, Equitas had 520 branches across India.

Equitas offer a range of financial products and services including:

- Microfinance
- Vehicle Finance
- Micro and Small Enterprise (MSE) Finance
- Housing Finance

HIGHLIGHTS

1. Large Portfolio of Easy to use, High quality Solutions
2. Recognised Brand Name and Positive Reputation
3. Large and Diverse User Base
4. Strong and Diversified Channel Network (15,000 retail channel partners, 230 enterprise channel partners, 279 government partners and 577 mobile channel partners as of 30 June, 2015)

5. Significant R&D and Technology Capabilities (It had 1,231 employees, including 449 who are part of its R&D team, as of June 30, 2015.)

6. Experienced Management Team and Qualified Pool of Employees Backed by a Venture Capital Investor. The company gets 70% of its revenue from retail customers while 30% is contributed by corporate customers.

Objects of the issue

1. Offer for Sale.
2. Investment in certain of Subsidiaries, viz: EFL, EMFL (Rs. 288 Crs.) and EHFL (around Rs. 40 Crs.), to augment their capital base to meet their future capital requirements arising out of growth in our business (the "Investment"); and

3. General Corporate Purposes. (Rs. 104 Crs.)

OUR VIEW

The company's revenue growth is at CAGR is at CAGR 33% in last 5 years. Getting the SFB license will likely change the dynamics of the business going forward.

Equitas is an excellent managed company which has managed to quickly turnaround its banking business. The growth has been commendable with very strong operating efficiencies however the return ratios are yet to improve. At a price of 110 the company is commanding a P/E of 25 which looks a bit pricey. Keeping the management quality in mind this company is likely to enjoy premium over its peers.


Source: Equity Bulls

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