Ujjivan, Equitas Holdings Surge 20% After RBI Permits SFBs To Merge With Holding Companies

On Monday, shares of Equitas Holdings, Ujjivan Financial Services, and IDFC soared up to 20% on the BSE after the Reserve Bank of India (RBI) approved the Amalgamation program for small financing banks (SFBs) and their holding companies.

On the BSE, Equitas Holdings and Ujjivan Financial Services remained locked in the 20% upper circuit, while Equitas SFB, IDFC, Ujjivan Small Finance Bank, and IDFC First Bank all climbed 17 percent.

Equitas and Ujjivan are both approaching the end of their five-year commercial operations.

Equitas Holdings, the bank's promoter, announced on Saturday that the bank had acquired RBI approval to file for the promoter's amalgamation into itself.

"RBI has also conveyed that any 'no-objection on the Scheme of Amalgamation, if and when given, will be without prejudice to RBI's powers to initiate action, if any, for violation of any licencing guidelines, terms and conditions of licence, or any other applicable instruction," Equitas Holdings said in an exchange filing on Saturday.

A promoter of a Small Finance Bank can exit or cease to be a promoter after the necessary initial lock-in term of five years, depending on the RBI's regulatory and supervisory comfort and SEBI Regulations in this regard at the time, according to SFB Licensing Guidelines.

Despite the fact that the SFBS must reduce promoter shares to less than 40% within five years, this scheme of the merger will provide promoters with an exit option and collapse the holding company structure.

Equitas and Ujjivan Holdings currently possess 82 percent and 83 percent of the underlying SFBs, respectively. Equitas and Ujjivan must diminish their ownership in the underlying bank by September 4th and January 31st, respectively.