CSB Bank IPO to open today; should you subscribe?
The CSB Bank IPO price band has been set at Rs 193-195 per share.
The bank, which was earlier known as, The Catholic Syrian Bank, has a strong base in Kerala along with a significant presence in Tamil Nadu, Karnataka and Maharashtra.
The IPO price band has been set at Rs 193-195 per share.
The issue will close on November 26. The IPO involves a fresh issue of shares of face value Rs 10 each to raise up to Rs 24 crore, and an offer for sale of 1.97 crore shares by existing investors through which it will raise Rs 385 crore.
CSB has a customer base of 13 lakh as of September 30, with a focus on SME, retail, and NRI customers.
CSB posted a total income 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, during these financial years.
For the first half-year 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.
The share premium has largely helped CSB to show positive book value. The issue is priced at a P/BV of 2.19 based on the post-conversion equity NAV of Rs 89.19 as on September 30. Based on the last three fiscals’ average negative EPS and negative RoNW, the issue is at a negative P/E against the industry average of 18.8.
The bank’s gross net-performing assets (NPAs) fell to 4.87 per cent as of March 31, 2019, from 7.25 per cent on March 31, 2017. As on September 30 this year, its gross NPAs stood at 2.86 per cent. The net NPA decreased to 2.27 per cent as of March 31, 2019, from 4.12 per cent as of March 31, 2017, and was 1.96 per cent as of September 30.
According to market experts, the issue is aggressively 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 GNPA ratio. Exposure to NBFCs/HFCs remains sizeable,” said Emkay Global.
The brokerage added 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.
“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 per cent and 3 per cent 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.
“CSB with its stable and granular deposit base has professional and experienced management with a strong and independent board which infuse optimism in future prospects of bank,” said Jain.
Bank has 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 bank’s results of operations.