Shares of Equitas Small Finance Bank Ltd. are down another 15% on Friday, October 30, extending their losses from Thursday’s 20% drop. The stock, which had gained as much as 6% after its September quarter results, took a nosedive after the announcement of its CEO PN Vasudevan’s resignation.
Towards the close of trade on Thursday, Equitas Small Finance Bank said in an exchange filing said that PN Vasudevan had resigned as MD & CEO with immediate effect, but will continue to discharge his duties till his successor takes over. Vasudevan had earlier proposed to step down in 2022, before deciding to continue to remain at the helm.
In his letter, Vasudevan clarified about a potential conflict of interest with an NBFC, which is co-promoted by his daughter, and has received its license from the Reserve Bank of India.
“In reality there is no conflict of interest, since there is no transaction at all between our bank and the said NBFC (except one short term deposit about 21/2 years back,which was duly repaid on maturity). There are no othertransactions including any loans by the bankto the NBFC,” Vasudevan wrote in his letter.
Vasudevan went on to write that despite explaining investors about this issue, the perception continues to persist. “Under the circumstances, it is important that we remove the overhang arising from this perception issue,” he wrote.
During the September quarter, Equitas Small Finance Bank reported a 32.6% growth in its Net Interest Income (NII) to ₹1,026 crore from ₹774 crore earlier. Gross NPA improved marginally sequentially, while Net NPA remained the same.
Nearly half of Equitas Small Finance Bank is owned by Mutual Funds, with 46.7% stake owned as of the September quarter. ICICI Prudential Life Insurance owns a 1.31% stake, while foreign portfolio investors had a 15.8% stake. Over 3.4 lakh small retail investors, or those with authorized share capital of up to ₹2 lakh, have a 11.46% stake at the end of the September quarter.
Global investment banking firm HSBC has maintained its “buy” rating on Equitas Small Finance Bank, but has cut its price target to ₹70 from ₹98 earlier.
It wrote in its note that the resignation of MD & CEO PN Vasudevan has overshadowed the strong earnings performance along with a guidance improvement.
Shares of Equitas Small Finance Bank are trading 14.1% lower on Friday at ₹49.08. The stock now trades at a 52-week low. The two-day fall has also erased all the year-to-date gains for the stock, which is now down 23% for the year so far. The stock has lost over ₹2,000 crore in market capitalisation after this two-day fall.
Stock Crash: Equitas Small Finance Bank shares down 30% from Thursday’s high; HSBC cuts target