CSB Bank IPO Details – Review

CSB Bank Ltd, formerly known as Catholic Syrian Bank, was founded in 1920 and is one of India’s oldest private sector banks. The bank has a major presence in Maharashtra and Southern India. The private sector lender aims to collect Rs 410 crore by issuing fresh equity shares and offering existing shareholders to sell shares via the deal at the upper end of the price band.

The price range for CSB Bank IPO was set at 193-195 Rs per share. CSB Bank is launching an IPO to meet potential capital needs and boost brand equity through the secondary market listing. In spite of the present situation, banking is not doing so well. Looking at CSB Bank’s financial data, risk-savvy investors can avoid the problem.

The CSB Bank IPO consists of a fresh issue of face value Rs 10 shares each with the objective of raising Rs 24 crore and an offer for sale (OFS) of 1.97 crore shares worth Rs 385 crore by existing investors. Following the fresh issue of the shares, the stake of the promoter entity Fairfax India Holdings in CSB Bank will fall from the current 50.09 percent to 49.73 percent.

A lot of hands are chasing a handful of stocks, in the short term IPO problems can experience a rapid increase in the share price. With a small capital, you might wish to ‘speculate.’ But as a consultant, we have a responsibility to tell you what’s right and to refrain from risk-taking behaviors in this business.

  • SME Banking
  • Wholesale Banking
  • Retail Banking
  • Treasury Operations

SME Banking

Under SME Banking, the bank offers banking services to retailers, related businesses, manufacturing, financial institutions, and corporate dealers. The products offered for this category include working capital loans, credit letters, term loans, bank guarantees, and discounting of bills/invoices.

Retail Banking

Within their retail banking business, they offer their retail and NRI clients a wide variety of loan and deposit products. Retail loan items include gold loans, vehicle loans including two-wheeler loans, property loans, personal loans, housing loans, farm loans, and education loans.

Wholesale Banking

CSB Bank serves the business needs of large and medium-sized enterprises and Rs 250 million companies and more credit criteria in the category of wholesale banking.

Treasury Operations

Their treasury operations consist primarily of the management of statutory reserves, asset-liability management, liquidity management, investment and securities trading, and money market and foreign exchange activities. They also sell Edelweiss Tokio Life Insurance Company Limited’s life insurance products, HDFC Life Insurance Company and ICICI Prudential Life Insurance Company Limited, and others.

CSB Bank is currently focused on introducing structural improvements to its business model to effectively act as a full-service private sector bank backed by FIH Mauritius Investments Ltd (FIHM).

While it has been around for almost ten decades, the bank’s previous brand name. ”Catholic Syrian Bank Limited’ had restricted scope and was only recognized in Kerala and other neighboring states, although it has branches in 16 states and four Indian union territories. The management also believes that there is a perceived misconception among the general public that part of their previous brand name reflects or represents interference by a religious community.

  • The bank is in the process of rebranding itself to “CSB Bank Limited” to address the perception issues of region and community related to the previous brand name.
  • The bank engages in lateral hiring along with hiring new recruits by offering market-based compensation with a variable pay component that is linked to performance.

The registrar to an issue is a Sebi-registered body that is eligible to function as such and that processes all the applications electronically and conducts the allocation process as per the prospectus. The registrar is responsible for updating the shares’ electronic credit to the qualifying applicants under the time limits. Sending and uploading refunds, and following completion of the problem, attending to all investor-related inquiries.

Competitive Strengths

  • Strengthy network and well-known South India brand
  • Enormous capital base
  • The business model developed for SMEs
  • A big part of portfolio gold loans
  • Prudent controls, policies, and procedures regarding risk management

Key Risks

  • Increased NPA could impact earnings
  • Managing asset quality in particular in corporate / SME portfolio, despite the current stressed scenario
  • Gold price volatility will affect financials
  • Promoter Fairfax (FIHM) would need to dilute 50.1 percent of the stake to 15 percent over the next 15 years, which could build a long-term overhang

CSB Bank IPO: Assessment

  • CSB Bank IPO is primarily to meet the RBI’s requirement of listing the bank.
  • The promoters CSB Bank is primarily focused in the states of Kerala and Tamil Nadu.
  • Fairfax (FIHM) had done a recent warrant conversion at Rs140/ share against present offering @Rs. 195 in IPO.
  • The sale of shares is by investors like existing investors like HDFC Life, ICICI Lombard, Icici Pru Life, Federal Bank, etc.
  • CSB bank has a network of Strong networks and is trusted in South India. Strong gold loan portfolio drives its Retail offering
  • Promoters will not sell. The promoter will hold a 50% stake in the bank after the IPO, which will be gradually reduced in 15 years to 40 percent in 5 years, 30% in 10 years, and 15% in 15 years in accordance with the RBI regulation.
  • The past CSB Bank has nothing to think about as the bank has registered losses in each of the last 3 years along with high NPAs.
  • CSB Bank ‘s peers including Federal Bank, DCB Bank, City Union Bank are at much lower ratings available.
  • CSB IPO is looking to be priced quite aggressively.
  • For just 10% reserved for small investors, the problem is very small. With strong returns in the recent past from investors in IRCTC & little activity in the primary sector, CSB Bank IPO should receive a good response.
  • At present, CSB Bank IPO with GMP of about Rs. 75 is seeing good demand in the grey market. It doesn’t seem acceptable and there’s no assurance it will survive. The only consolation is with a Fairfax-like flagship buyer, who can live in the limelight.

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