CSB Bank IPO to open on November 22; 10 things you need to know

Currently FIHM holds 8,62,62,976 equity shares, representing 50.09 percent of the paid-up equity share capital of the bank.

Kerala-based private sector lender CSB Bank (earlier known as The Catholic Syrian Bank) will launch its initial public offering for subscription on November 22.

The anchor investor offer period will be one working day prior to the IPO opening date which is November 21.

The issue will close on November 26. The bank in consultation with merchant bankers will finalise basis of allotment on December 2 and will credit equity shares to shareholders’ DP accounts on December 3, Axis Capital said in its note.

Equity shares are proposed to be listed on the BSE, as well as, the National Stock Exchange on December 4. The book running lead managers to the issue are Axis Capital and IIFL Securities.

Here are 10 key things to know before subscribing the issue:

Bank’s ProfileCSB has a strong base in Kerala along with a significant presence in Tamil Nadu, Karnataka, and Maharashtra. It has an overall customer base of 1.3 million as of September 2019, and delivers products and services through multiple channels, including 412 branches (excluding three service branches and three asset recovery branches) and 290 ATMs spread across

16 states and four union territories.

CSB has four principal business areas, namely, SME Banking, Retail Banking, Wholesale Banking and Treasury operations.

The bank also distributes life insurance products of various companies under contractual arrangements entered into with them.

Public Issue Details

The IPO consists of a fresh issue aggregating up to Rs 24 crore and an offer for sale of up to 1,97,78,298 equity shares by the selling shareholders.

The price band is fixed at Rs 193-195 per share. Bids can be made for a minimum lot of 75 equity shares and in multiples of 75 equity shares thereafter.

Amount To be Raised

The bank aims to raise Rs 405.72 crore at the lower end of the price band and Rs 409.68 crore at the higher band.

The market capitalisation of the bank at the current issue price band stood at Rs 3,348 – 3,382 crore.

Objects of Issue

The bank will use net proceeds from the offer for augmenting Tier-I capital base to meet future capital requirements which are expected to arise out of growth in the bank’s assets, primarily loans/advances and investment portfolio and to ensure compliance with Basel III and other RBI guidelines.

Further, the proceeds from the offer will be used towards meeting the expenses of the offer. The bank will not get any amount from the offer for sale.

Assets Size

Its total assets (gross) increased from Rs 16,127.6 crore as on March 31, 2017 to Rs 16,911.2 crore as on March 31, 2019. Further, total assets (gross) were Rs 17,755.5 crore as on September 30, 2019.

Overall deposits grew at a slower pace from Rs 14,911.6 crore in FY17 to Rs 15,123.9 crore in FY19 due to its conscious strategy of reducing term deposits and focusing more on CASA. Advances increased from Rs 8,000.8 crore in FY17 to Rs 10,615.2 crore in FY19.

Deposits during April-September period stood at Rs 15,509.82 crore and advances at Rs 11,402.83 crore.

Financials

CSB Bank reported a profit of Rs 44.27 crore in the six-month period ended September 2019 while it had posted a loss of Rs 65.69 crore in FY19 against loss of Rs 127.09 crore in FY18.

Net interest income for first half of FY20 stood at Rs 279.52 crore while the same in FY19 was at Rs 439.95 crore, increased from Rs 384.81 crore in FY18.

Asset quality of the bank improved with gross non-performing assets (NPA) as a percentage of gross advances declining to 2.86 percent at the end of September 2019, from 4.87 percent in March 2019.

Net NPA also decreased to 1.96 percent at the end of September this year, from 2.27 percent in March 2019.

The provisioning coverage ratio, too, improved to 79.45 percent in September, from 78.16 percent in March 2019.

The net interest margin stood at 3.43 percent during April-September period this year and the same was at 2.80 percent in FY19 primarily on account of reduction in the cost of funds and an increase in credit to deposit ratio.

Shareholding

Fairfax India through FIH Mauritius Investments Ltd (FIHM) received approval from RBI to acquire 51 percent stake in CSB Bank against capital infusion of around Rs 1,207.68 crore.

The bank received Rs 720.75 crore in fiscal 2019 and the balance amount of Rs 486.93 crore in the second quarter of fiscal 2020, which make it well-capitalised.

Currently, FIHM holds 8,62,62,976 equity shares, representing 50.09 percent of the paid-up equity share capital of the bank.

Promoter FIHM’s shareholding will be reduced to 38.33 percent from 50.09 percent post issue, Axis Capital note said.

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Competitive Strengths

> Strong channel network and trusted brand in South India

> Capital position has been significantly strengthened post FIHMs investment in the bank.

> It has well established SME business

> Its retail offering is driven by strong gold loan portfolio: Gold loan book has grown by 23 percent from Rs 2,026.3 crore in FY17 to Rs 2,483.6 crore in FY18 and by 34 percent to Rs 3,333.1 crore in FY19.

> It has a stable and granular deposit base.

> It has professional and experienced management with a strong and independent board.

> It has instituted prudent risk management controls, policies, and procedures that are critical for the long-term sustainable development of business.

Business Strategies

> Accelerate transformation as new age private bank

> Grow asset business with focus on SME, agricultural and retail customers by leveraging capital position.

> Continue to leverage strong deposits franchise

> Grow and diversify distribution infrastructure in key geographical locations.

> Maximizing non-interest income by widening products and services for corporates as well as retail customers.

> Invest in technology to improve operational efficiency, scalability and customer experience.

> Strengthening risk management

> Focus on NPA recovery and improve asset quality

Management

Rajendran Chinna Veerappan is the Managing Director and Chief Executive Officer of the bank. He previously served as the chief executive of the Association of Mutual Funds in India and associated with Corporation Bank, Andhra Bank and Bank of Maharashtra. He has been on the bank board since November 24, 2016.

Madhavan Karunakaran Menon is the Part-time Chairman and a non–executive Director of the bank. Sumit Maheshwari is the Non–executive Director of the bank.

Thomas Mathew, Bhama Krishnamurthy, Aravamuthan Madhavan and Syed Nagoor Ali Jinnah are the Independent Director of the Bank.

Veluthattil Maheswari is the Chief Financial Officer of the bank. She has been associated with the bank since 1994.Sijo Varghese is the Company Secretary and Compliance Officer and Vincy Louis Pallissery is the Chief Compliance Officer of the Bank.

Source: Moneycontrol

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