Daily Archives: November 21, 2019

CSB Bank

IPO Dates: Nov 22, 2019 – Nov 26, 2019

1. Pricing Of Issue:

2. Planned Usage of Funds:
   To augment Bank’s Tier-I capital base to meet the Bank’s future capital requirements;
   2. To achieve the benefits of listing the Equity Shares on the Stock Exchanges and Offer for Sale
3. Promotersand Management
   The Promoter of the Bank is FIH Mauritius Investments Ltd which holds 50.09% of the company with an Average cost of Acquisition being Rs. 140 per share. The promoter will remain as the promoter of the Bank post listing.

FIHM is a wholly owned subsidiary of Fairfax India Holdings Corporation which is backed by Mr. Prem Watsa who has a proven track record in investing.

FIHM’s principal activity is to achieve long-term capital appreciation, by investing in public and private equity securities and debt instruments and it has no experience in the banking business. The Promoters have to reduce their stake to 40% in the next 5 years, 30% in the next 10 years and 15% in the next 15 years

The Management:

Mr. Rajendran Chinna Veerappan- Managing Director and Chief Executive Officer

Mr. Madhavan Karunakaran Menon- Part – time Chairman and Non-executive Director

4. Products & Services, Places & Plants:
   Catholic Syrian Bank mainly operates in the South Indian region and has concentrated operations in Kerela.
5. Participation in Equity:
   

CSB has a total of 26082 shareholders out of which 26 are offering their shares in the Offer for sale. The 26 shareholders combined hold 2,05,42,749 or 11.928% of the company out of which 1,97,78,298 or 11.48% are being offered by them with 20 of the 26 shareholders completely exiting the company

7,65,451 or 0.44% of the shares will be with the 6 shareholders who have not completely exited

FIHM is going to remain the promoter of the Bank with 49.74% of shares post IPO

Interestingly, 2 companies being Way2Walth and Satellite Multicomm with cost of Acquisitions above the IPO Price are existing completely along with the Insurance Companies who were asked to step in 3 years ago when the bank needed capital. Now that the Bank has no shortage of Capital after the FIHM’s investment, the Insurance Companies are exiting and are the major contributors for the Offer for Sale.

6. Peer Group: Small Private Banks

* upper band of Rs 195 has been used for the price

All figures in RS. Crs unless stated otherwise.

P/E has been annualised

CSB Bank’s promoter’s holding has been calculated post IPO

7. Pre & Post Issue Valuation:
   
   As on half year ended September 2019, Assuming all shares are allotted at Rs. 195

8. Performance, Prospects & Pains:

Other than risks related to being a part of the Banking business being changes in the RBI’s norms, interest rate fluctuations rising NPA level management etc, Risks specific to the Bank are below:

• They will be unable to recover loans given to certain defaulting parties which are being pursued according to the SARFAESI Act.
• They are regionally concentrated in Kerela and depend on the political and economic condition of the South Indian region. Further, they may not be able to expand to other regions of India.
• Significant portions of their loans are secured by gold ornaments and any fall in the price of gold could affect the bank
• Their loans are concentrated to certain industries whos performance could impact their business. Mainly 19.38% is lent to NBFC including HFCs, 7.96% is lent out to Traders in Retail and Wholesales and 4.73% of their Advances are concentrated in the Textile Industry.
• Some of the Directors are involved in certain legal and other proceedings in India and may face certain liabilities as a result of the same.
• The Bank has not been able to maintain the minimum prescribed CRAR under the Basel III Norms in past. As on March 31, 2018, the CRAR under the Basel III Norms was 8.33% (including capital conservation buffer), as compared to the minimum prescribed regulatory requirement of 10.875% (which includes a capital conservation buffer of 1.875%). However, as on March 31, 2019, CRAR under the Basel III Norms was 16.70% (including capital conservation buffer), as compared to the minimum prescribed regulatory requirement of 10.875% (which includes a capital conservation buffer of 1.875%); but there can be no assurance that theywill be able to maintain CRAR above the minimum prescribed regulatory requirements in future.
• Some of their Corporate records are untraceable and they maybe penalized in the future for that
• The bank may not be able to maintain its CRL and SLR Requirements. In the past, the Bank has paid ` 0.36 million, ` 0.18 million, and ` 0.53 million to the RBI on account of default in maintaining SLR on a daily basis in Fiscals 1988, 1989, and 1990, respectively, as additional interest paid in respect of shortfalls in the SLR maintained during such periods. However, it has maintained our SLR and accordingly not paid any additional interest in respect of shortfalls in the SLR maintained post 1990.
• The bank issubject to Risk Based Supervision (“RBS”) by RBI. Non-compliance with the RBI observations could adversely affect business, financial condition,  results of operations and ability to obtain the regulatory permits and approvals required to expand business.the RBI has identified certain deficiencies in the operations of our Bank in the following areas: · credit appraisal and monitoring; data quality and automation;n monitoring and detection of frauds; compliance culture and risk monitoring; software and security measures; erroneous reporting and mis-classification; KYC non-compliance; and upgradation of ATMs.
• It requires prior permission from the RBI Before opening new branches especially in Tier 1 to 6 areas

What works for the Company:

• It has very little debt and hence is in a position to leverage in the future
• It is backed my Mr Prem Watsa who has a proven track record with companies through his company Fairfax like Quess Corp and Thomas cook to name a few
• Operating costs are expected to go down further as the salaries of new employee Is Rs 3.5 lakhs p.a which is significantly lower than the current average of Rs. 11.5 lakhs
• The Bank has reduced the retirement age from 60 to 58, this has helped them bring in newer management with better vision and abilities as the old one has retired
• The current CASA (Current Account to Savings Account) stands at 28% which the management plans to take to 40 in the next few years
• Currently its loan book consists of 33% gold loans, 32% in SMEs, 8% in Retail and 28% to corporates. It aims to increase its Gold and SME Lending and a new team is joining them for MSME loans.

9. Positioning of Debt:
   The company has no borrowings as per September, 30 2019
10. Policy:
    The bank issubject to Risk Based Supervision (“RBS”) by RBI. Non-compliance with the RBI observations could adversely affect business, financial condition,  results of operations and ability to obtain the regulatory permits and approvals required to expand business.the RBI has identified certain deficiencies in the operations of our Bank in the following areas: · credit appraisal and monitoring; data quality and automation;n monitoring and detection of frauds; compliance culture and risk monitoring; software and security measures; erroneous reporting and mis-classification; KYC non-compliance; and upgradation of ATMs.
    Other than that, it is subject to all bankikng norms as per RBI Policy.

    Affle India IPO Details:

The Rs 459-crore IPO received bids for 29,21,57,880 shares against the total issue size of 33,78,021 shares
The total issue was overall subscribed 86.48 times. It raised Rs 206.55 crores from Anchor Investors which is included in the 459 crore issue size.

IRCTC IPO Details:
The Rs 645-crore initial public offer (IPO) by state-run IRCTC was overall subscribed 111.92 times The issue of 2,01,60,000 shares received bids for 2,25,63,63,400 shares.

Forbes and Company Ltd

Industrial Machinery

FV – Rs 10; 52wks H/L – 2718.9/1552; TTQ – 16 K; CMP – Rs 2200 (As On November 21, 2019);                     

            Market Cap – Rs 2838 Crs

Consolidated Financials and Valuations (Amt in Rs Crs unless specified)

*In PAT of H1 FY20 , loss of Rs 150 Crs is recorded as Impairment of Goodwill in the subsidiary of the company Eureka Forbes Ltd.

Forbes & Company, a Shapoorji Pallonji group firm on Tuesday announced plans to list its subsidiary Eureka Forbes to unlock value for shareholders. (https://economictimes.indiatimes.com/markets/ipos/fpos/forbes-company-mulls-listing-eureka-forbes/articleshow/72125249.cms)

Management:

Mr. Shapoorji Pallonji Mistry is the Chairman of the Company

Mr. M. C. Tahilyani is the MD of the company.

Overview:

• Forbes is into precision tooling and an engineering services with a wide product portfolio supported by strong brands like TOTEM and BRADMA.
• The company has an attractive customer base who are few of the world’s large businesses in their transformational journeys for the last many decades.
• The Company leverages all these and its deep contextual knowledge of its customers’ businesses to craft unique, high quality, high impact solutions.
• We are also simultaneously expanding our global footprint further in Eastern and West Europe, few countries in North America and South East Asia.
• The main businesses of the Company is Engineering and Realty and through its subsidiaries Transaction Management Solutions, Water Purification, Transportation of Chemical through its owned Ships etc.

Shareholding Pattern:

67.67% of the promoter holdings are pledged. Earlier it was 9.5% In March 2019.

Major Non – Promoter Holdings:

Segment Results:

5 years price snapshot:

Subsidiaries and Step down Subsidiaries of the company:

SHAPOORJI PALLONJI COMPANY LTD/ FORBES & COMPANY LTD

1.Eureka Forbes Ltd

• Aquaiginis Ltd
• Aquadiagnostics Water Research Ltd
• EFL Mauritius Ltd
• Euro Forbes Fianancial Services Ltd
• Euro Forbes Ltd
• Forbes Lux FZCO

• Forbes Lux International AG
• Lux International AG
• LIAG Trading & Invt Ltd
• Lux Aqua Paraguay SA
• Lux del paraguay S.A
• Lux Hungaria kft
• Lux Aqua Hungaria Kft
• Lux International Services & Logistics Ltd
• Lux Italia srl
• Lux Aqua Czech
• Lux Oesterreich GmbH
• Lux (Duetschland) GmbH
• Lux Norge A/S
• Lux Schweiz AG

2.Forbes Technology Ltd

3.SPSFL

4.Forbes Campbell Ltd

• Forbes Bumi Armada Ltd

5.Campbell Properties & Hospitality Ltd

6.Volkart Flemming Ltd

7.FBAL

Eureka Forbes Ltd:

Company had subscribed 50000 shares of Rs. 10 each . (Rs 25 crores infused in the EFL)

For every 100 new shares 7456 shares were allotted (100:7456) for a price of Rs 5010 per share.

Share Capital – Rs 3.7 Crs (FV – Rs 10)

Hence, Valuation = Rs 5010*0.37 = Rs 1853 Crs, which is one time Sales of Rs 1842 Crs.