The issue for initial public offering (IPO) of CSB Bank (formerly known as Catholic Syrian Bank) opens on 22 November. The Rs 410 crore-IPO includes a fresh issue of shares as well as an offer-for-sale by existing investors.
The issue has a 75 percent reservation for qualified institutional buyers (QIBs), 15 percent for non-institutional investors and 10 percent for retail investors. Anchor investors bidding date is 21 November.
- The issue will be open for subscription between 22 and 26 November.
- The IPO includes a fresh issue of shares at the face value of Rs 10 to aggregate Rs 24 crore and an offer-for-sale (OFS) of 1.97 crore shares by existing investors to raise Rs 385 crore.
- The existing investors selling shares include ICICI Lombard General Insurance, HDFC Life Insurance, ICICI Prudential Life Insurance, Federal Bank, Bridge India Fund, Satellite Multicomm, Way2Wealth Securities, Edelweiss Tokio Life Insurance, Vinod Mohan Nair and P-Cube Enterprises.
- The price band for the issue is fixed at Rs 193 to 195 per share.
- The bank is aiming to raise Rs 405.72 crore at the lower end of the price band and Rs 409.68 crore at the higher end.
- The market cap of the bank at the price band will be Rs 3,348 - 3,382 crore.
- Lot size for the issue is set at 75 shares. The minimum lot size is one (75 shares) and the maximum is 13 lots (975 shares).
- Proceeds from the fresh issue will be used to augment the bank's tier-1 capital base and to meet its future capital requirements. Proceeds from OFS will not be received by the bank.
- Basis of allotment will be finalised on 2 December in consultation with merchant bankers.
- Equity will be credited to allotted subscribers' DP accounts on 3 December.
- Shares are proposed to be listed on BSE and NSE on 4 December.
- The book running lead managers to the issue are Axis Capital and IIFL Securities.
- Registrar to the IPO is Link Intime India.
About CSB Bank
The Kerala-based private bank was incorporated in 1920. Formerly known as Catholic Syrian Bank, it is the oldest private bank in India. It has a significant presence in the states of Kerala, Maharashtra, Karnataka and Tamil Nadu with a customer base of 1.3 million as of September 2019 mainly in the retail, SME and NRI banking segment. It has 412 branches and 290 ATMs.
CSB Bank's primary business areas are SME Banking, Retail Banking, Wholesale Banking and Treasury operations. It also has a contractual arrangement to distribute life insurance products of HDFC, Edelweiss Tokio, and ICICI Prudential Life Insurance Company Ltd and general insurance products of Reliance General Insurance Company Ltd.
In 2018, Indian-Canadian billionaire, Prem Watsa's, Fairfax India, through FIH Mauritius Investments Ltd (FIHM) received approval from the RBI to acquire 51 percent stake in CSB Bank against a capital infusion of around Rs 1,207.68 crore. Presently, FIHM holds 50.09 percent stake, which will be reduced to 38.33 percent post the issue, as per Axis Capital's note.
Business and financials
CSB Bank reported a net profit of Rs 44.27 crore in the six-month period ended September 2019 as against a loss of Rs 65.69 crore in the financial year 2018-19.
Its net interest income for the same period stood at Rs 279.52 crore and Rs 439.95 crore in FY19. Asset quality of the bank improved with its gross non-performing assets (NPA) as a percentage of gross advances falling to 2.86 percent at the end of September 2019, from 4.87 percent in March. Net NPA also declined to 1.96 percent in September from 2.27 percent in March.
The bank has a strong presence in the gold loan portfolio and has an established SME business in South India.
CSB Bank is looking to focus on a new business model to work as a full-service new age private sector bank.
Points to consider
The bank's business is heavily concentrated in South India, especially Kerala, making it vulnerable to any major political or economic changes in this geography.
"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 GNPA ratio. Exposure to NBFCs/HFCs remains sizeable," said Emkay Global.
The brokerage also said that while the bank has done reasonably well in its first phase of transformation over the past two to three years, the second phase of the transformation journey to take the bank to a new growth phase will be challenging.