Equitas shares plunge 27% as CEO exit rattles investors

By Friday, Equitas Small Finance Bank shares had fallen more than 27% in two sessions, dropping below Rs 50. The slide came just after the lender reported its highest-ever quarterly profit of Rs 218 crore. Investors focused instead on the sudden departure of its longtime chief, P N Vasudevan, and uncertainty over who will lead the bank next. ^1,3

Below Rs 50, the share price reflected concern about Vasudevan’s resignation, announced on Thursday. He said investors had repeatedly questioned whether his daughter’s role as a co-owner of a finance company created a conflict. Vasudevan said the relationship was disclosed to the bank’s board and the Reserve Bank of India. He said the only past dealing was a short-term deposit, repaid about two and a half years ago. No loans or other transactions took place, he said. ^1,6

The search for a successor now comes alongside a strong but mixed business picture. Equitas reported profit of Rs 218 crore for the September quarter, up sharply from Rs 24 crore a year earlier, and raised its loan-growth target for the year. But the gap between what it earns on loans and pays for funds fell to 6.69%. Analysts also flagged uncertainty over leadership and the need for a smooth handover. The share selloff came despite those better results. ^3,10

The handover is expected to take three to four months, including regulatory approval. The board has asked Vasudevan to stay until a successor takes charge, and its selection group will consider candidates from inside and outside the bank. Investors will be watching for the successor’s name and a clear transition plan as the lender tries to restore confidence. ^5,8