CSB Bank IPO opens today; here’s what you need to know
The lender offers to sell 2,10,21,821 shares in a price band of Rs 193-195.
The lender offers to sell 2,10,21,821 shares in a price band of Rs 193-195. As many as 1.98 crore shares will be under offer for sale and rest of them will be offered via fresh equity. The bank plans to raise up to Rs 409 crore via the issue.
Three fourths of the offered shares have been kept for QIBs (qualified institutional buyers) and 15 per cent for non-institutional investors. Rest of the shares will be for retail subscribers.
After the issue, promoter shareholding in the company will fall to 49.7 per cent from the current 50.1 per cent.
CSB Bank has a strong base in Kerala along with a significant presence in Tamil Nadu, Karnataka and Maharashtra. It has a customer base of 13 lakh, with particular focus on SME, retail and NRI customers.
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.
CSB posted a total income of 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 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.
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-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.