The 98-year-old CSB Bank, which received a capital infusion from Canadian billionaire Prem Watsa's Fairfax India, has capital required for the next three to four years and the initial public offering (IPO) by the lender has been done to meet the directions of the Reserve Bank of India (RBI), MD & CEO CVR Rajendran told Hariprasad Radhakrishnan and Urvashi Valecha. The Kerala-based bank plans to increase its presence in Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra and Gujarat in the coming years, he added. Edited excerpts:
What do you think is the investor appetite right now for IPOs?
Going by the roadshows, there has been a tremendous response as not many issues are available in the market and the mid-cap universe remains limited. Most of them, the bigger funds, feel that it is a small issue for them to participate in because it is a Rs 400-crore issue, with Rs 180 crore for anchor investors, leaving only Rs 220 crore. That includes allocation for high net worth individuals (HNIs) and retail investors. Everybody wants to have a reasonable allocation. For anyone coming into the issue with the right price and the right story, I think there is a good interest in the Indian equities.
What does the bank plan to do with the capital raised?
This is not a capital-raising effort at all. It is only an effort to list the company as per the regulator's requirements. We have enough capital from Fairfax, which should be sufficient for the next three to four years. We thought of listing without diluting core shareholders' stake, and so we went for an offer for sale. So, hardly Rs 25 crore is coming to the bank.
What will be the focus of CSB going forward, in terms of expansion to other regions?
There is a market for gold loans all over the country. But our familiarity with the regions - the west and south - is the only reason why we wanted to confine ourselves to this area. Given our brand reach and the potential in the gold-loan sector there, Tamil Nadu will be one area where we will start in a big way, and we will get into Andhra Pradesh and Telangana, where the household stock of gold is more and agricultural lending is possible. In Maharashtra and Gujarat, our knowledge of the geography is what dictates our policy at this point of time.
Would the slowdown in credit growth affect the profitability of the bank?
Demand is always there, but lending has come down. Credit underwriting standards have become much tougher, making credit availability an issue. Today when NBFCs (non-banking finance companies) are slowing down, I find bigger opportunities for small players like us.
Do you think the bank is competing in a crowded market in the gold loan sector with a number of NBFCs?
Many NBFCs that had entered have exited as well. Managing gold loans requires a skill-set. Everyone of our employees knows how to assess the gold. There is a stigma attached to gold loans, as people don't want to be seen as pledging their gold in the market. People are more comfortable with parting their gold with banks rather than NBFCs. Gold loans have the ring of a lower middle-class product. But, if we bring in the 'middle' middle-class, the market size would be three times of what we are seeing today.