The SFB Arm of Equitas Holdings has Applied For Voluntary Merger

Equitas Small Finance Bank (ESFB) announced on June 20 that the bank and its parent Equitas Holdings Ltd (EHL) have filed a combined application for the scheme of amalgamation with the Chennai Bench of the National Company Law Tribunal (NCLT).

“…We desire to notify that the Joint Application by EHL and ESFB for the Scheme of Amalgamation was filed with the National Company Law Tribunal, Chennai Bench on 18 June 2022, seeking orders for convening Meeting of shareholders and creditors of EHL and ESFBL,” ESFB said in a BSE filing.

In May of this year, the Reserve Bank of India (RBI) granted EHL and ESFBL permission to merge voluntarily.

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RBI Conditions

The RBI’s approval comes with limitations. The merger is taking place to meet with RBI regulations on small finance banks, which require the promoter to cut their stake in the subsidiary to 40 percent within five years of the small finance bank commencing operations (SFB).

Prior to the merger, RBI stated that EHL must transfer its stake in subsidiary Equitas Technologies P Ltd. Prior to the scheme’s implementation, Equitas SFB will also need RBI clearance to bring Equitas Development Initiatives Trust (EDIT) and Equitas Healthcare Foundation (EHF) under its purview.

In addition, the plan must be accepted by the required majority of shareholders and creditors of EHL and ESFBL in accordance with relevant procedure, and the documentation relating to shareholder meetings must be filed to the RBI in accordance with applicable RBI regulations.

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The merger between the holding company and the subsidiary SFB is intended to satisfy RBI’s licence requirements to reduce the holding company’s shareholding to 40 percent within five years from the date the bank began operations, which will be accomplished by September 4, 2021.

In addition, RBI standards provide that a promoter of an SFB may exit after the five-year lock-in period, pending regulatory permissions.

According to the scheme of amalgamation, each of the transferor firm’s (Equitas Holdings) equity owners will get 231 equity shares for every 100 shares of the transferee business (Equitas SFB).

“Given that the transferor company has no identified promoter and all of its shareholders are public shareholders, issue of shares under the plan would result in an increase of public shareholding in the bank from 25.41 percent (as of date) to 100 percent,” stated Equitas SFB.

Equitas Holdings shares closed at Rs 84.20 per share on the BSE, up 3.38 percent from the previous close. Equitas SFB shares closed down 1.29 percent at Rs 38.40 per share.

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