Equitas Small Finance Bank (SFB) shares on Thursday rose 14% to Rs 56.50, its highest level since listing, on BSE in intraday trading on the back of large volumes. The bank debuted on the stock exchange on November 2, 2020. With today’s rally, the stock has jumped 71% from the issue price of Rs 33 per share.
Over-the-counter trading volumes jumped 1.6 times in the first half hour of trading with a total of 3.6 million equity shares changing hands on the NSE and BSE, up to at 09:41. Currently, the stock was trading 11% at Rs 55.35, against a 1.5% drop in the S&P BSE Sensex.
In the past three days, the stock has jumped 20 percent after rating agency CRISIL reaffirmed the ratings of Equitas SFB’s bank facility and debt securities.
“Ratings continue to reflect the bank’s diversified product profile, adequate capitalization and growing deposit base, as well as the experience of its senior management. These strengths are partially offset by the borrowers’ modest credit risk profiles, the average profitability and geographic concentration of activities and the relatively high cost of funds compared to the banking system, ”said CRISIL in the rating justification.
After transforming into a bank, it focused on core segments such as microfinance and vehicle finance to small business loans, MSEs, business loans, housing finance and others. The diversity of the asset mix helped reduce the impact on collections after demonetization and subsequent political issues facing microfinance players in certain geographies, as well as Covid-19. As the bank continues to increase its portfolio of secured loans, replacing much of the existing unsecured portfolio, volatility in asset quality due to inherent shortcomings in the unsecured segment will decrease, the rating agency said.
However, despite the diversification of the portfolio across asset segments and the increased focus on secured loans, the bank’s customer base has not changed significantly. The borrower base still includes people living in rural and semi-urban areas, doing small business transactions or doing small jobs that may be associated with irregular cash flow.
Equitas is a highly process-oriented entity with robust systems and processes with strong technical support since the inception of microfinance operations. This attribute allowed the company to quickly grow and replicate similar models with modifications for vehicles and other portfolios, CRISIL said.
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