Equitas SFB shares tumble after CEO exit
Equitas Small Finance Bank shares plunged 17% on Friday, October 30, after managing director and CEO PN Vasudevan resigned. The stock had already fallen 20% in the previous session. It hit an intraday low of Rs 47.26 on the BSE before recovering slightly to trade at Rs 48.55, down 14.81%. The BSE Sensex was nearly flat at 74,166.
CEO Exits to Resolve Conflict Perception
The bank’s board acknowledged Vasudevan’s resignation on Thursday. He stated his intent to pursue personal and social initiatives. However, his resignation letter also addressed a conflict-of-interest issue. An NBFC co-promoted by his daughter was the source of the concern.
Vasudevan maintained there was no actual conflict, as no transactions occurred between Equitas SFB and the NBFC. He did acknowledge one short-term deposit made about two-and-a-half years ago, which was fully repaid. Despite his explanations, the perception of a problem remained. According to Vasudevan, investors had told him that the overhang was contributing to the bank’s stock underperformance.
In his resignation letter, he said stepping down was necessary to remove this perception and allow the stock to reflect the bank’s financial strength. The bank has asked Vasudevan to continue in his role until a suitable successor is identified. His resignation will take effect after he hands over responsibilities to the successor.
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Speaking to NDTV Profit, Vasudevan reiterated his belief that the overhang was impacting the stock. He clarified there were no regulatory concerns and that his decision was not driven by stakeholder discussions. He also confirmed he holds no stake in his daughter’s company.
Strong Q2 Results Fail to Calm Investors
The resignation comes despite Equitas SFB reporting strong Q2 FY27 results. Net profit surged more than ninefold year-on-year to Rs 218 crore, up from Rs 24 crore. Net interest income (NII) rose 32.7% to Rs 1,026 crore, and operating profit grew to Rs 402 crore.
Asset quality also improved. Gross non-performing assets (GNPA) fell to 2.29% from 2.42% in the previous quarter. Net NPA was marginally lower at 0.70%. Provisions declined to Rs 115 crore from Rs 161 crore. The bank’s tax expense increased to Rs 69.3 crore from Rs 9.4 crore.
The financial performance suggests the market may have been undervaluing the bank. The CEO’s move to remove the perceived conflict could help align the stock’s price with its underlying operational success. The bank also reappointed Anil Sharma as part-time chairman for a three-year term. Separately, the bank reported that asset quality also showed a sequential improvement, with GNPA declining from 2.42% in the previous quarter. Provisions for the quarter were Rs 115 crore, down from Rs 161 crore in the prior quarter and Rs 207 crore in the year-ago period.
