Equitas SFB zooms after RBI approves DSP Investment Managers’ bid to acquire 10% stake

The proposed acquisition of shares by DSPIM would be consequent to its merger with Equitas Holdings Limited.

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Shares of Equitas Small Finance Bank zoomed after the company said that the Reserve Bank of India (RBI) has approved DSP Investment Managers Private Ltd (DSPIM) bid to acquire up to a 9.99 percent stake in the lender.

“The Bank has received an intimation from RBI on November 16, 2022, that it has granted its approval to M/s DSP Investment Managers Private Ltd (DSPIM) to acquire up to 9.99 percent of the paid-up equity capital of the Bank through the schemes of DSP Mutual Fund (DSPMF),” it said in an exchange filing.

The proposed acquisition of shares by DSPIM would be consequent to its merger with Equitas Holdings Limited.

Reacting to the news, shares of the lender zoomed in as much as 12.64 percent to Rs 57 on the BSE. At the time of writing this news, the scrip was trading six percent higher at Rs 53.85.

Analysts are largely bullish on the stock. ICICI Securities has maintained BUY with an unchanged target price of Rs 70, valuing the stock at 1.75 times Sep’23 expected P/BV.

“While financial performance would continue to improve, we expect RoA to reach 1.9 percent by FY24 though likely management change poses execution risk,” said the broker.

Asset quality of the bank continued to improve in Q2FY23 with gross bad loans falling to 3.9 percent against 4.1 percent in Q1FY23. Net bad loans, too, slipped to 2 percent vs 2.15 percent recorded in Q1FY23 with the provision coverage ratio improving to 50.5 percent vs 48.5 percent in Q1FY23.

Geojit Financial Services values the stock at 1.5x FY24 expected Adj. BVPS to arrive at a target price of Rs 57 and recommend an Accumulate rating. BVPS stands for book value per share.

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