Equitas Small Finance Bank (ESFB) on June 20 said the bank and its parent Equitas Holdings Ltd (EHL) have made a joint application for the scheme of amalgamation at the National Company Law Tribunal (NCLT), Chennai Bench.

"...We wish to inform that the Joint application by EHL and ESFB for the Scheme of Amalgamation has been filed under sections 230 to 232 and other applicable provisions of the Companies Act, 2013 with the National Company Law Tribunal, Chennai Bench on June 18, 2022, seeking directions on convening Meeting of shareholders and creditors of EHL and ESFBL," ESFB said in a BSE filing.

In May this year, EHL and ESFBL received a no-objection from the Reserve Bank of India (RBI) on their voluntary amalgamation.

RBI conditions

The RBI no-objection comes with conditions. The merger is being effected to comply with the RBI norms on small finance banks, mandating the promoter to reduce the stake in the subsidiary to 40 percent within five years of commencement of operations by the small finance bank (SFB).

However, RBI said EHL must divest its shareholding in its subsidiary Equitas Technologies P Ltd prior to the amalgamation. Besides, Equitas SFB will have to seek RBI approval for bringing Equitas Development Initiatives Trust (EDIT) and Equitas Healthcare Foundation (EHF) under its ambit prior to the scheme taking effect.

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Further, the scheme has to be approved by the requisite majority of shareholders and creditors of EHL and ESFBL as per applicable procedure, and the documents in connection with shareholder meetings will have to be submitted to the RBI as required under applicable RBI regulations.

The amalgamation between the holding company and the subsidiary SFB is aimed at meeting RBI's licensing conditions to bring down the shareholding of the holding company to 40 percent within a period of five years from the date of commencement of business of the bank, which completed by September 4, 2021.

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RBI guidelines also stipulates that a promoter of an SFB can exit after completing the lock-in period of five years, subject to regulatory approvals. As per the scheme of amalgamation, each of the equity shareholders of the transferor company (Equitas Holdings) will be allotted 231 equity shares for every 100 shares of the transferee company (Equitas SFB).

"Considering that transferor company is a company with no identifiable promoter and all its shareholders are public shareholders, issue of shares under the scheme would result in an increase of public shareholding in the bank from 25.41 percent (as on date) to 100 percent," Equitas SFB said.

The stock of Equitas Holdings closed at Rs 84.20 apiece on BSE, up by 3.38 percent from the previous close. The Equitas SFB scrip ended 1.29 percent lower at Rs 38.40 apiece.