Ujjivan and Equitas hit new lows

Ujjivan and Equitas are the top two losers on the BSE currently. Equitas leads, going down to a new low at Rs.93.10 and Ujjivan too hit a new low at Rs.177.70.

The stock prices have crashed on news that RBI has clarified and issued a circular stating that promoters of small finance banks must list their banking units separately within three years of operation in line with RBI’s licensing requirements.

RBI stated that banks need to meet the listing norms within  three years from the date of commencement of its operations i.e. by January 31, 2020 and maintaining the promoter shareholding in the bank to at least 40%, for a period of five years from the date of commencement of business of the bank i.e. until January 31, 2022.

This means that Ujjivan and Equitas will need to list their small finance bank by the time it completes three years of operation – Ujjivan deadline is Jan 2020 and Equitas is Sept 2019.

Obviously the market is not happy as it means that there will now be dual listing – holding company and the bank. Both the companies have said that they will approach the RBI for merging the bank with the holding company; this can be done only after the expiry of the promoter lock-in, which is Jan’22 for Ujjivan and Sep’21 for Equitas. This in turn means that the currently listed two holding companies will see discount on its price.