Equitas Holdings - Huge Long Term Growth Opportunity: HDFC Securities Initiates Coverage

HDFC Securities Retail Research

Equitas Holdings Ltd. is a non-deposit taking, systemically important core investment company of Equitas Small Finance Bank Ltd. (holds 74.5% stake).

As a part of the banking license requirement, Equitas Holding has floated its wholly owned subsidiary which obtained a scheduled commercial bank license in 2016. Equitas SFB is one of the largest small finance banks in India and offers bouquet of products and services. The key business verticals includes micro finance, small business loans, home loans and vehicle finance.

It started as a MFI and gradually forayed into other businesses like small business loan, home and vehicle loans. The bank also has one of the best in class current account and savings account ratio (at 51.7%), supported by its digital acquisition strategy and fintech tie-ups.

This along with high growth in the other business has helped the bank maintain high margins, despite transforming itself from a micro finance institution to a diverse services provider.

We feel that the holding company discount will gradually narrow as the time passes because the company has already announced that it wants to reverse merge itself with Equitas SFB.

All the necessary approvals have been already received and as per management the merger should be done by March 2023.

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