Shares of Equitas Holdings and Ujjivan Financial Services were frozen in their respective 20 percent upper circuits after the Reserve Bank of India (RBI) permitted the small finance banks (SFBs) to apply for a reverse merger. This means the small finance banks can now merge with their respective holding companies.
Shares of Equitas Holdings and Ujjivan Financial Services end at their respective 20 percent upper circuits on Monday after the Reserve Bank of India (RBI) permitted the small finance banks (SFBs) to apply for a reverse merger. This means the small finance banks can now merge with their respective holding companies.
Equitas Holding was locked in a 20 percent upper circuit at Rs 138.40, its 52-week high while Equitas Small Finance Bank surged 7.30 percent to end at 69.85. It rallied as much as 17.8 percent intraday to its 52-week high of Rs 76.75.
Similarly, Ujjivan Financial Service ended at 20 percent upper circuit at Rs 244.90 on the BSE while Ujjivan SFB ended 1.48 percent higher at Rs 30.95 apiece.
Both Equitas Holding, promoter of Equitas SFB, and Ujjivan Financial Services, promoter of Ujjivan SFB have received RBI nod to initiate steps and file for a scheme of amalgamation of the promoter entity with the bank. All four entities are listed.
As per the SFB licensing guidelines of RBI, a promoter of SFB can exit or cease to be a promoter after the mandatory initial lock-in period of five years (initial promoter lock-in) depending on RBI's regulatory and supervisory comfort and SEBI regulations at that time.
"In case of Equitas Small Finance Bank Limited (“the Bank"), our subsidiary for which the Company is the promoter, the said Initial Promoter Lock-in for the Company expires on September 4, 2021. Hence, the Bank had requested RBI if a Scheme of Amalgamation of the Company with the Bank, resulting in the exit of the promoter, can be submitted to RBI for approval, before the expiry of the said five years, to take effect after the Initial Promoter Lock-in expires," Equitas said in a filing.
RBI has also conveyed that any 'no objection', if and when given on the scheme of amalgamation, would be without prejudice to the powers of RBI to initiate action, if any, for violation of any licensing guidelines or any terms and conditions of the licence, or any other applicable instruction.