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CSB Bank IPO subscribed 1.7 times on Day 2 so far

Headquartered in Kerala, CSB Bank is among the oldest private sector bank in India.

ETMarkets.com|
Updated: Nov 25, 2019, 03.25 PM IST
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Headquartered in Kerala, CSB Bank is among the oldest private sector bank in India.
NEW DELHI: The initial public offering by CSB Bank, which got subscribed on Day 1 itself, received 1.7 times subscription by 11.15 am on Monday.

The issue received bids for 1,98,01,275 shares so far on Day 2 against the issue price of 1,15,54,987.

Headquartered in Kerala, CSB Bank is among the oldest private sector bank in India. After struggling for many years owing to lack of capital, the bank is gradually coming out of trouble backed by fund infusion from Fairfax group, analysts noted.

At the upper limit of the price band Rs 193-195, the issue is valued at 2.4 times its price to book value on H1FY20, post issue diluted basis.

“Post the acquisition by Fairfax group, the realigned operational strategy has helped the company to report profits in H1FY20. The company is focused to improve profitability and growth going ahead. We believe that given the strong promoter backing and turnaround in profitability, investor can Subscribe to the IPO for listing gains, said Motilal Oswal Financial Services.

Angel Broking, on the other hand, is neutral on the IPO as it believes that asking valuations are expensive considering the investment concerns.

Similar banks such as DCB Bank (P/BV of 1.73 times), Federal Bank (1.36 times, South Indian Bank (0.5 times), and Karur Vysya Bank at 0.8 times are trading at lower valuation than CSB and have better return ratio.

“Gold financiers with better return profile and pan India presence are trading at 2.6x of Q2FY2020 Book Value. We believe investors should wait for price discovery before taking any investment decision. Hence, we have a neutral view on the issue,” Angel Broking said.

The bank has 83 per cent exposure towards three states -- Kerala, Tamil Nadu and Karnataka. It has 412 branches across 16 states and four union territory with employee base of 3,001 as of FY19.

“CSB’s performance has not been encouraging in the past with rise in NPA level. However, new promoter and strong management brings capital and execution strength on the table which bodes well for future growth as well as earnings. Therefore, we assign a SUBSCRIBE recommendation to the stock,” ICICIdirect said in a note.

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