Equitas Small Finance Bank on Tuesday received Securities and Exchange Board of India's (SEBI) approval to launch its initial public offering (IPO). The IPO includes a fresh issue of shares worth Rs 550 crore and an offer-for-sale (OFS) of 8 crore equity shares by Equitas Holdings Limited (EHL), the promoter, according to document filed with market regulator SEBI.

A subsidiary of Equitas Holdings, Equitas Small Finance Bank had filed draft red herring prospectus (DRHP) with Sebi for initial public offer on December 16, 2019.

The offer includes a reservation of up to Rs 100 crore for subscription by eligible EHL shareholders and a reservation aggregating up to Rs 5 crore for subscription by eligible employees, as per the offer document.

The bank intends to utilise the net fresh issue proceeds from the offer to raise the bank's tier-1 capital (primarily loans or advances and investment portfolio) to meet future capital requirements. Adding to it, the bank will continue to focus on its rural and semi urban franchisees and increase deposits across non-resident Indians, among others, the draft papers noted.

The bank is likely to consider a pre-IPO placement of up to Rs 300 crore. If it is undertaken, the amount raised will be reduced from the fresh issue.

Equitas Small Finance Bank is one of the largest small finance bank (SFB) in India in terms of the number of banking outlets. The lender operates in 16 states and 1 union territory through its 403 branches and 38 ultra-small branches, serving over 3.73 million customers.

During September quarter of 2019, the bank's net profit increased to Rs 92.44 crore against Rs 24.06 crore in the same quarter of previous fiscal.  Interest earned rose to Rs 660.68 crore from Rs 472.25 crore in September quarter of 2019.

The public issue of shares is being managed by Axis Capital, Edelweiss Financial Services, ICICI Securities and IIFL Securities. The equity shares will be listed on Bombay Stock Exchange and National Stock Exchange.

By Chitranjan Kumar