Equitas Small Finance Bank jumps 7% to hit 52-week high; what fuelled the rally?

Shares of Equitas Small Finance Bank witnessed a surge in buying activity on Wednesday, with the stock price rising as much as 7% to hit a fresh record high, in an otherwise weak broader market. The share price of the private lender got a boost after the Reserve Bank India (RBI) gave nod to SBI Funds Management Limited (SBIFML) to acquire shares in the bank. SBIFML proposes to buy up to 9.99% stake in the bank through the schemes of SBI Mutual Fund.

“The bank has received an intimation from RBI on January 3, 2023, according approval to SBI Funds Management Limited (SBIFML) to acquire up to 9.99% of the paid-up equity capital of the bank through the schemes of SBI Mutual Fund (SBIMF),” Equitas SFB said in a BSE filing on Tuesday.

“The aforesaid approval by RBI is subject to compliance with the relevant provisions of Banking Regulation Act,1949, Master Direction on Prior Approval for Acquisition of shares or voting rights in Private Sector Banks dated November 19, 2015 and Master Direction on Ownership in Private sector Banks dated May 12, 2016, issued by RBI, provisions of the regulations issued by Securities and Exchange Board of India, provisions of the Foreign Exchange Management Act, 1999 and any other guidelines, regulations and statutes as applicable and is valid for a period of one year i.e. up to January 02, 2024,” it added.

As of September 30, 2022, promoter group entities own 74.5% stake in the bank, while mutual funds and foreign institutions hold 13.17% and 4.26% shares, respectively. Among others, retail investors own 6.73% shareholding. The exchange data showed that SBI Large & Midcap Fund held 3.09% stake in the bank.

Cheering the news, Equitas Small Finance Bank share price opened higher at ₹61.70 against the previous closing price of ₹59.50 on the BSE. The banking stock gained as much as 7.4% to hit a 52-week high of ₹63.9, while the market capitalisation surged to ₹7,570 crore. The counter breached its previous high of ₹63.10, touched on December 13, 2022. 

The small finance bank has delivered a muted return of 1.5% in the past one year, while it has gained 53% in the six month period. In the last one month, the smallcap stock climbed 7.5%, and 6% in a week. The stock currently trades 70% higher than its 52-week low of ₹37.5 touched on June 17, 2022.  

Meanwhile, shares of Equitas Holdings, the promoter of Equitas SFB, also hit a 52-week high of ₹136.60 intraday on the BSE.

In a similar development, Equitas SFB in November last year had received the RBI approval for acquisition of 9.99% stake by DSP Investment Managers Private Ltd (DSPIM), subject to certain conditions.