Equitas shares fall 17% as two-day losses widen to more than 27%
Key Facts
Shares of Equitas Small Finance Bank fell as much as 17% in early trading on October 30, taking their two-day decline to more than 27%, according to Fortune India. The sell-off followed the resignation of founder, managing director and chief executive P. N. Vasudevan, amid investor concerns about the leadership transition. It coincided with the bank reporting a record quarterly net profit of 218 crore rupees in the second quarter of fiscal 2027. But the report said the resignation overshadowed the quarterly results as investors weighed business growth against margin pressure and transition risks. Trading volume exceeded 50 lakh shares, compared with a two-week average of 3.54 lakh shares, reflecting heavy activity after the news broke.
In his resignation letter, Vasudevan said investors had repeatedly raised, over the previous three years, a perception of a conflict of interest because his daughter was a founding partner in a non-banking finance company. He said the company received a licence from the Reserve Bank of India in 2023, and that his connection to the bank and his daughter's role in the company had been disclosed to the board and the central bank as required. He described his resignation as a step to remove the perception, which had resurfaced at investor meetings, and said it had weighed on the share price. He added that dealings between the bank and the company were limited to a short-term deposit made about two and a half years ago and repaid at maturity. He denied any other dealings, including the bank extending loans to the company.
The fall followed a decline of as much as 20% in Thursday's session on October 29 after the announcement, before the shares ended 12.4% lower at 56.99 rupees on the BSE, according to Business Standard. The next morning, the shares fell 17%, while cumulative losses over two days exceeded 27%, Fortune India reported. Trading data cited in the report showed that more than 50 lakh shares changed hands, against a two-week average of 3.54 lakh shares. The moves highlight the market's response to the news over two consecutive sessions, while the report did not specify a closing price for the October 30 session. Vasudevan had said that repeated investor questions about the perceived conflict of interest had contributed to pressure on the shares.
On results, the record net profit of 218 crore rupees rose 803% year on year and 19% from the previous quarter. JM Financial said profit exceeded its estimate by 13%, with the bank setting a new quarterly record. Advances grew 30% year on year and 6% quarter on quarter, while deposits increased 19% year on year and 7% quarter on quarter. The bank's total business also crossed 1 lakh crore rupees in the quarter ended September 2026. The figures reflect an expansion in business volume, but came alongside a contraction in net interest margin, presenting an operating picture of growth in lending and deposits alongside a shrinking margin.
Net interest margin was 6.69% in the second quarter, down 55 basis points from the previous quarter, with Elara attributing the pressure to a higher cost of funds and excess liquidity. Asset quality improved quarter on quarter: gross non-performing assets fell to 2.29% from 2.42%, and net non-performing assets to 0.70% from 0.71%. Management raised its fiscal 2027 advances growth guidance to 25%. It also raised its return on assets guidance to about 1.35%, from a previous forecast of 1.2%. The upward revisions to operating guidance came alongside margin pressure, as investors track the effect of the leadership change on the bank's plans.
The board asked Vasudevan to continue as managing director and chief executive until his successor takes office, and directed the Nomination and Remuneration Committee to identify candidates from inside and outside the bank. The bank expects to complete the successor's selection and obtain regulatory approvals within three to four months of the resignation announcement in October 2026. Vasudevan has been associated with Equitas since its founding as a microfinance institution in 2007 and led its transition into a small finance bank in 2016, according to Business Standard. That background puts the selection of a new chief executive at the top of the bank's upcoming agenda, alongside execution of its fiscal 2027 guidance. The transition arrangements are expected to become clearer during the three to four months the bank has set to complete the process.