Equitas, Ujjivan tank in the wake of RBI letter

Equitas Holdings, a microfinance company and Ujjivan Financial Services, an NBFC opened with a gap-down on Friday’s session and plunged more than 30 and 20 per cent, respectively. Investors turned cautious as RBI issued letters to these companies reminding licensing requirements. 

Banking regulatory, RBI issued letters to the entities on listing of small finance banks. RBI gave a mandate to the promoters of the small finance banks to list their banking units separately within three years of operation. The same is already mentioned under RBI’s licensing requirements for small finance banks.

By rule, if the subsidiaries of the holding companies are not merged, those ought to get listed within 3 years of the operation. Further, after listing, the promoters’ stake is required to be reduced to 40 per cent for 5-year period. However, both these finance companies may go for reverse merger to avoid listing.

Considering this Equitas Holdings is required to be listed by September 4, 2019 while for Ujjivan the date would come to January 30, 2020. Companies have sought time extension from RBI. Companies would consider both, an IPO and a reconstruction arrangement. Ujjivan is mulling an option to sell 60 per cent of the bank’s shares to the existing shareholders. If these firms list their banking division, they would attract a holding discount.