Equitas MD quits citing overhang from daughter's business, shares crash

Mumbai: Shares of Equitas Small Finance Bank crashed 20% on Thursday, after managing director and chief executive officer PN Vasudevan resigned citing “overhang” of potential conflict of interest from his daughter promoting a non-bank entity.

In a letter to the bank’s chairman and board of directors, Vasudevan, who founded Equitas as a microfinance institution in 2007, conveyed his intention to step down to pursue certain “personal and social initiatives”. He said his daughter is the co-promoter of an NBFC which received its licence from RBI in 2023, which was disclosed to the bank’s board and the Reserve Bank of India. Vasudevan’s daughter, Varshini Vasudevan Pathangi, founded Unico Housing Finance in 2023.

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Despite him being the MD of a bank and his daughter being the co-promoter of an NBFC being within the regulatory framework of the Banking Regulations Act, Vasudevan said he has repeatedly asked about the perceived conflict of interest in investor meetings over the past three years.

In reality, there is no conflict of interest, since there is no transaction at all between the bank and the NBFC, except one short-term deposit about 2.5 years back, which was duly repaid on maturity. “There are no other transactions, including any loans by the bank to the NBFC,” Vasudevan said, adding that in spite of him explaining this to investors, the perception of conflict continues to persist.

‘Overhang’

“I am told by investors that this ‘overhang’ is causing the stock to underperform, impacting value creation for both shareholders and employees. Sometimes, perceptions are stronger than reality. Under the circumstance, it is important that we remove the ‘overhang’ arising out of the perception issue. Accordingly, I would like to step down from the bank,” Vasudevan said in his letter, adding that with this ‘overhang’ removed, the stock should reflect the financial strength of the bank, benefiting all stakeholders including employees.

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The board “took note of” and accepted the resignation, while requesting Vasudevan to continue to discharge the responsibilities of MD & CEO till his successor is in place, the bank notified the exchanges, The board also asked the nomination and remuneration committee to identify and recommend suitable candidates, both internal and external.

“Mr. P. N. Vasudevan has confirmed that he will continue to function as MD & CEO till his successor takes over from him. The board will ensure that the bank continues to pursue its long-term vision set out earlier, and does not expect this transition to have any impact on the same,” the notification said.

With the exchanges being notified post 1500 IST, shares of the bank crashed over 20% intraday to hit the lower circuit of ₹52.11 toward the close of the trading session. The stock pared some losses to end 12.2% lower at ₹57.17 on the NSE.

Vasudevan said that with the objective of becoming the ‘Banker of Choice’ for the informal/semi formal segment of customers, Equitas has over the past 10 years, built a “strong moat around its business model” and is poised for the next phase of growth.

Succession risk

“This is a major event risk for the bank because he was the key person at Equitas. There doesn’t seem to be anyone second in line, which means the bank will have to get someone from outside as his successor. So, there is anticipation of disruption,” an industry analyst said on the condition of anonymity.

The lack of succession planning at the bank previously surfaced when Vasudevan sought to step down from the position in 2022 to pursue “philanthropic activities”. However, he later withdrew his resignation after the board requested him to continue. This was followed by RBI approving his reappointment as MD & CEO for a three-year term effective July 2023, and yet another three-year term starting July 2026.

In an interview with Business Standard in August 2026, Vasudevan had said that in 2022, he wanted to quit to start a new NBFC to create a corpus to fund his family trust’s social-sector initiatives, including an adoption centre and doorstep therapy service for special children. However, with him rejoining Equitas, his friend started an NBFC and his daughter became a co-promoter. “She is not in any way connected to the operations of the NBFC. She is a psychologist.” He had then also said that he remains eligible to be reappointed even after July 2029 for two years, and remains committed to “being associated with the bank till then”.

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Unsecured microfinance now accounts for only around 10% of advances, thus de-risking any potential future stress in this space, he said in Thursday’s letter, adding that with the branch network now at 1,100 touchpoints, only a normal increase in the network required to support growth over the next 5 years.

Under Vasudevan, Equitas SFB has laid out five-year plans through March 2031, projecting a compounded annual growth rate (CAGR) of more than 20% in advances and deposits to reach ₹1.2 trillion. The bank has guided for an average of return on assets (RoA) of 1.5% over this period.

The small finance bank on Thursday recorded record quarterly profit of ₹218 crore. Gross advances grew 30% on year and 6% on quarter to ₹50,669 crore as at the end of September 2026, whereas deposits grew 19% on year and 7% sequentially to ₹52,483 crore.