Introduction to IPO

An initial public offering (IPO) is the process of selling shares of a private corporation to the
general public for the first time through a stock exchange This is usually done after a
company has a track record of profitability and sufficient prospects to entice investors. The
first sale of a company's shares to institutional investors, who then sell them to the general
public via a securities exchange is known as IPO. After an IPO is issued the company is no
more private it becomes a public listed company. After the shares are listed even public
investors can become shareholders of the company, they are also able to participate in the
offering. IPOs allow companies to raise capital by selling shares on the primary market.
Through IPO’s companies can raise much more capital and also gain the ability to expand
and grow their company. It is a big step for any company because they will be going through
various procedures and risks when they offer their shares for the first time.

Introduction to the company

Equitas Small Finance Bank is a microfinance lender that was founded in 2016. The bank's
headquarters are in Chennai, and it is a subsidiary of Equitas Holdings Ltd.Equitas Small
Finance Bank began operations on 5 September 2016 after receiving a license from the
Reserve Bank of India (RBI) on 30 June 2016. Equitas was designated as a scheduled bank
on February 4, 2017. In October 2020, the bank went public through an initial public offering
(IPO. On November 23, 2021, the bank announced a co-branded credit card partnership with
HDFC Bank. Equitas Bank is one of the largest small finance banks in India. They offer a
range of banking products and services to customers with a focus on serving the financially
unserved and underserved customer segments in India.
Equitas Small Finance Bank IPO Details

IPO Opening Date Oct 20, 2020

IPO Closing Date Oct 22, 2020

Issue Type Book Built Issue IPO
Face Value ₹10 per equity share
IPO Price ₹32 to ₹33 per equity share
Market Lot 450 Shares
Min Order Quantity 450 Shares
Listing At BSE, NSE
[.] Eq Shares of ₹10
Issue Size
(aggregating up to ₹517.60 Cr)
[.] Eq Shares of ₹10
Fresh Issue
(aggregating up to ₹280.00 Cr)
72,000,000 Eq Shares of ₹10
Offer for Sale
(aggregating up to ₹237.60 Cr)

Equitas Small Finance Bank Ltd Listing Day Data

Open 31.00

High 33.05

Close 32.75

Low 30.10

Volume Rs. 117886838.00

On October 20, 2020, Equitas Bank issued its shares for public offering and the company
went public. The issue price ranged from 32-33 per share. The IPO Size of 517.60 Crores and
the same will be used for augmenting Bank’s Tier I capital base to meet the Bank’s future
capital requirements. Now the share price has increased to 50-54 range.

Hypothetical Question
Issue of shares
 Equitas Bank Ltd invited applications for 50,000 equity shares of rupees 10 each share
On application ₹ 3 (Payable on 1st November)
On allotment ₹3 (Payable on 1st December)
On first call ₹2 (Payable on 1st January)
On final call ₹2 (Payable on 1st February)
All the shares were fully subscribed
Shareholder A has been allotted 200 shares who paid the full amount paid call amount along
with allotment.
Shareholder B holding 100 shares did not pay the final call due till the date of the balance
sheet
Interest is not charged on calls-in-advance nor calls-in-arrear

Date Particulars L.F Dr ( ₹ ) Cr ( ₹ )

11/1/2020 Bank a/c … Dr 150,000
To shares application a/c 150,000
( Being the application money received)
12/1/2020 Shares application a/c … Dr 150,000
To share capital a/c 150,000
(Being the transfer of application money to share capital account)
12/1/2020 Shares allotment a/c … Dr 150,000
To share capital a/c 150,000
( Being the allotment money due on 50,000 shares received)
12/1/2020 Bank a/c … Dr 150,800
To shares allotment a/c 150,000
To calls-in-advance account a/c 800
( Being the allotment money received with calls-in-advance money)
1/1/2021 Shares first call a/c … Dr 100,000
To share capital a/c 100,000
( being the first call money due)
1/1/2021 Bank a/c … Dr 99,600
Calls-in-advance a/c 400
To shares first call a/c 100,000
( Being the first call money received and calls-in-advance adjusted)
2/1/2021 Shares second and final call a/c … Dr 100,000
To share capital a/c 100,000
( Being the second and final call money due)
2/1/2021 Bank a/c … Dr 99,400
Calls-in-advance a/c … Dr 400
Calls-in-arrears a/c … Dr 200
To shares second and final call a/c 100,000
( Being the second and final call money received)

Issue of Debentures
Equitas Bank Ltd issued 5,000, 10% debentures of ₹100 each on 1st April 2021 at par redeemable at a
 premium of 10%
TDS is deducted at 10%. Interest is payable half-yearly on Sept 30th and March 31st.

Date Particulars L.F Dr ( ₹ ) Cr ( ₹)

4/1/2021 Bank a/c … Dr 500,000
To debentures application and allotment a/c 500,000
( Being the amount received on application)
4/1/2021 Debentures application and allotment a/c … Dr 500,000
Loss on issue of debentures a/c … Dr 50,000
To debentures 10% a/c 500,000
To Premium on redemption of debentures a/c 50,000
( Being the debentures issued at par and redeemable at 10% premium.)
9/30/2021 Debentures interest a/c … Dr 25,000
To debentureholders a/c 22,500
To TDS payable a/c 2,500
( Being the interest due for 6 months and TDS deducted at 10% )
9/30/2021 Debentureholder's a/c … Dr 22,500
To bank a/c 22,500
( Being the payment of interest)
9/30/2021 TDS payable a/c … Dr 2500
To bank a/c 2,500
( Being the TDS deducted deposited)
3/31/2022 Debentures interest a/c … Dr 25,000
To debentureholders a/c 22,500
To TDS payable a/c 2,500
( Being the interest due for 6 months and TDS deducted at 10% )
3/31/2022 Debentureholder's a/c … Dr 22,500
To bank a/c 2,500
( Being the payment of interest )
3/31/2022 TDS payable a/c … Dr 2,500
To bank a/c 2,500
( Being the TDS deducted deposited)
3/31/2022 Statement of Profit and Loss ( Finance cost) … Dr 100,000
To debentures interest a/c 50,000
To loss on issue of debentures a/c 50,000
( Being the transfer of debenture interest and loss n debentures to P&L a/c)

Balance sheet
Some liabilities and assets of Equitas Bank are given below
From the following information, we are gonna prepare a
balance sheet as per schedule III of the companies act,2013.

Particulars ₹
2,00,00
General Reserve 0
2,00,00
Building 0
4,00,00
Investments 0
1,00,00
Profit and Loss (Debit balance) 0
5,00,60
Cash and Bank balance 0
5,00,00
Share Capital ( 50,000 Equity shares of ₹10) 0
Calls-in-arrears ( ₹2 per share) 200
2,00,00
Goodwill 0
Unclaimed Dividend 90,000
Calls-in-advance 800
5,00,00
10% Debentures 0
The company has an authorized capital of 50,000 shares of
₹10 each

The balance sheet of Equitas Bank LTD as on 31/03/2022

Note
Particulars No ₹
I. Equity and Liabilities    
1. Shareholder's Funds    
(a) Share Capital 1 4,99,800
(b) Reserves and Surplus 2 1,00,000
2. Non-Current Liabilities  
Long Term Borrowings 3 5,00,000
3. Current Liabilities  
Other Current Liabilities 4 90,800
11,90,60
Total 0
II. Assets  
1. Non-Current Assets  
Fixed Assets:  
(i) Tangible Assets 5 6,00,000
(ii) Intangible Assets 6 90,000
2. Current Assets    
 Cash and Bank balances 7 5,00,600
11,90,60
Total   0

Notes to Accounts

Particulars ₹ ₹
1. Share Capital
Authorized Capital
5,00,00
50,000 equity shares of ₹10 each 0
Issued Capital
5,00,00
50,000 equity shares of ₹10 each 0
Subscribed Capital
Susbcribed and Fully Paid-up
49,900 shares of ₹10 each 4,99,000
Subscribed but not fully paid-up
100 equity shares of ₹10 each
1000
Less: Calls in arrear 4,99,80
200 800 0
2. Reserves and Surplus
General Reserve 2,00,000
Surplus; i.e Balance of Profit and Loss ( Debit (1,00,000 1,00,00
balance) ) 0
3. Long term borrowings
5,00,00
10% Debentures 0
4. Other Current Liabilities
Unclaimed Dividend 90,000
Calls-in-advance 800 90,800
5. Tangible Assets
Building 2,00,000
6,00,00
Investments 4,00,000 0
6. Intangible Assets
Goodwill 90,000