Nearly a century-old private lender CSB formally known as Catholic Syrian Bank is all set to launch its Initial Public Offer (IPO) today. The bank previously used to cater to southern India with small and medium enterprises (SME) loans but now plans to expand its tier-1 capital to 410 crores. CSB Bank IPO will close on November 2019.
The lender offers to sell 2,10,21,821 shares in a price band of Rs 193-195. As many as 1.98 crore shares will be under offer for sale and the rest of them will be offered via fresh equity. The bank plans to raise up to Rs 409 crore via the issue.
CSB Bank has a 1.3 Million customer base in Kerala along with a significant presence in Tamil Nadu, Karnataka, and Maharashtra with a particular focus on SME, retail and NRI customers. Bank has a regional concentration in Southern India, especially Kerala. Any adverse change in the economic, political or geographical conditions of Kerala and other states in southern India can impact a bank’s results of operations.
In 2018, the Reserve Bank of India (RBI) allowed Fairfax India (via FIH Mauritius Investments Ltd) to acquire a controlling 51 percent stake in the bank. Apart from Fairfax, ICICI Lombard General Insurance, HDFC Life Insurance, ICICI Prudential Life Insurance, The Federal Bank, Way2Wealth Securities, and Edelweiss Tokio Life Insurance, too, hold a stake in the bank.
As on September 30, 2019, CSB had a network of 412 branches (excluding 3 services and 3 asset recovery branches) and 290 ATMs.
CSB posted a total income of Rs 1,617.50 crore in FY17, Rs 1,422.27 crore in FY18, and Rs 1,483.43 crore in FY19. It incurred a net loss of Rs 57.99 crore, Rs 127.09 crore, and Rs 65.69 crore, respectively.
For the first half of FY20, it posted a profit of Rs 44.27 crore on a total income of Rs 816.71 crore. From FY17 to FY19, the EPS and return on net worth (RoNW) of CSB bank was negative, but for the first half of FY20, it reported an EPS of Rs 3.86.
Listen to the Market Experts who thinks CBS is high-priced:
“CSB is going for the IPO mainly to meet the RBI’s requirement of listing the bank. The bank has seen a steady decline in the GNPA ratio. Exposure to NBFCs/HFCs remains sizeable,” said Emkay Global.
The brokerage said, “The bank has done reasonably well in its first phase of transformation over the past two-three years. However, the second phase of the transformational journey to take the bank to a new growth phase will be challenging.”
“At the upper price band, the IPO is priced at valuations of 2.4 times September 19 ABV (post-money) for a sub-par RoA and RoE of 0.5 percent and 3 percent against some of its close peers such as South Indian Bank and Federal Bank that are trading in the range of 0.6-1.4 times,” Emkay added.
Astha Jain, Research Analyst at Hem Securities recommended ‘subscribe’ on the issue for listing gains as well as long term investment.