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CSB Bank IPO to raise up to Rs 410 crore kicks off tomorrow; key things to know

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CSB IPO to raise up to Rs 410 crore opens for subscription tomorrow. Kerala-based CSB Bank’s IPO( formerly known as Catholic Syrian Bank) is being carried out to meet RBI’s regluation with regard to listing. The public offer contains a fresh issue of shares to raise up to Rs 24 crore, and an offer for sale (OFS) of 1.97 crore shares by existing investors through which it will sell Rs 385 crore of scrips. Even as investors maybe mulling whether to invest in the IPO, we take a look at key details.

Issue details

CSB IPO will remain open till November 26th, Tuesday. The price band has been fixed at Rs 193-195 per share. Bids can be made for a minimum lot of 75 equity shares and in multiples of 75 equity shares thereafter. The bank is set to  finalise basis of allotment on December 2 and will credit equity shares to shareholders’ DP accounts on December 3, Axis Capital said in its note.

About CSB Bank

CSB Bank is one of the oldest private sector banks in India with a history of over 98 years and has a strong base in Kerala along with significant presence in Tamil Nadu, Karnataka, and Maharashtra. Predominantly a  community oriented bank in its earlier avatar, the bank has now embarked on a transformational journey promoter FIHM (Fairfax India Holdings-Mauritius Ltd) owned by Mr. Prem Watsa with a firm long-term commitment to stay with the bank, Emkay said in its pre-IPO note.

Financials

CSB Bank has reported a net profit of Rs 44.27 crore in the April-September period, while it had posted a loss of Rs 65.69 crore in FY19 against loss of Rs 127.09 crore in FY18. The bank’s Net interest income for first half of FY20 stood at Rs 279.52 crore while the same in FY19 was at Rs 439.95 crore, increased from Rs 384.81 crore in FY18. The firm’s asset quality of the bank improved with gross non-performing assets (NPA) as a percentage of gross advances declining to 2.86 percent at the end of September 2019, from 4.87 percent in March 2019. Net NPA also decreased to 1.96 percent at the end of September this year, from 2.27 percent in March 2019.

Valuation

Taking stock of the valuations, Emkay said that the offer is pricier than its listed peers. "At the upper price band of Rs195, the IPO is priced at valuations of 2.4x Sep'19 ABV (post money) for a sub-par RoA/RoE of 0.5%/3% vs. some of its close peers such as South Indian Bank/Federal Bank that are trading in the range of 0.6-1.4x," said the research firm. The brokerage noted that the bank has done reasonably well in its first phase of transformation over the past two to three years. However, the second phase of the transformational journey to take the bank to a new growth phase will be challenging, as per its assessment. "CSB with its stable and granular deposit base has professional and experienced management with strong and independent Board which infuse optimism in future prospects of bank.
Hence we recommend "Subscribe" on issue for listing gain as well as long term investment," HEM said in its IPO note.