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CSB Bank IPO

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CSB Bank IPO

CSB Bank

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

  1. Pricing Of Issue:
Tentative Price Band Rs 193 to Rs 195
Issue Type This is a 100% Book Building Issue involving both the issue of Fresh Equity Shares and an Offer for Sale by 26 Shareholders
Issue Size Rs. 409.68 crs
Fresh Issue 12,00,000 Eq Shares of ₹10 (aggregating up to ₹23.4 Cr)
Offer for Sale 1,97,78,298 Eq Shares of ₹10 (aggregating up to ₹ 395.6 Cr)
Face Value ₹10 Per Equity Share
Book Running Lead Manager: Axis Capital Limited and IIFL Holdings Limited
Registrar Link Intime
Listing at Bombay Stock Exchange, National Stock Exchange
Market Lot 75 Shares (Rs 14625)

 

  1. 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
  2. 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

  1. Products & Services, Places & Plants:
    Catholic Syrian Bank mainly operates in the South Indian region and has concentrated operations in Kerela.
  2. 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

Shareholders Pre IPO Post IPO
  No of Shares % Average cost of acquisition No of Shares %
FIHM 8,62,62,976 50.09 140 8,62,62,976 49.74
ICICI Lombard General Insurance Company Limited 10,00,000 0.581 100 NIL NIL
HDFC Life Insurance Company Limited 40,44,000 2.348 120 NIL NIL
ICICI Prudential Life Insurance Company Limited 30,44,000 1.767 120 NIL NIL
The Federal Bank Limited 27,85,661 1.617 156.03 NIL NIL
Edelweiss Tokio Life Insurance Company Limited 8,46,100 0.491 120 NIL NIL
P-Cube Enterprises Private Limited 6,48,000 0.376 174.07 324000 0.19
Plant Lipids Private Limited 5,38,888 0.313 150.77 404166 0.23
Way2Wealth Securities Private Limited 15,55,214 0.903 255.85 NIL NIL
Satellite Multicomm Private Limited 19,39,097 1.126 235 NIL NIL
TOTAL 17,22,25,058 100   17,34,25,058 100.00

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.

  1. Peer Group: Small Private Banks
Name of Bank (H1 20) Lakshmi Vilas Bank South Indian Bank Karnataka Bank Bandhan Bank Karus Vysya Bank RBL Bank CSB

Bank

FV Rs 10 1 10 10 2 10 10
CMP Rs 19.65 11.04 74 535.2 56.6 338.55 195*
Market Cap 680 1997 2091 86178 4524 14582 3468*
52 Week High Rs 97.35 18.55 141.15 650 95 716.00
52 Week Low Rs 13.35 8.4 68 397 51 230
Advances 16932 62993 53468 59785 47101 58476 11297
Deposits 27863 82947 70189 49196 62212 62829 12508
Net NPA 1772 2193 1863.ll 220 2118 338 221.5
NPA Ratio % 10.47 3.48 3.48 0.69 4.41 0.74 1.96
Equity Capital 336 181 283 1610 159 430.6 173.4
Net Worth 1474 5547 5947 14016 6500 7798 1559.4
Long Term Debt 1079 4772 2448 16520 3052 13953
Total Sales 1112 4279 3767.56 6012 3030 3486 816.7
PAT (594) 157 281.33 1775 136 394 44.2
BV Rs 43.86 30.6 210 87 81.7 181 89.9
EPS Rs (18.13) 0.87 9.95 8.13 1.7 7.5 7.7
P/E 12.6 7.4 33 16.47 22.53 12.66*
P/BV 0.4 0.36 0.35 6.14 0.7 1.9 2.16*
Promoter’s Holdings % 6.81 0.00 0.00 82.26 2.10 0.00 49.74

 

* 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

  1. Pre & Post Issue Valuation:

    As on half year ended September 2019, Assuming all shares are allotted at Rs. 195
Rs. Crs Number of shares Equity Capital Net Worth
Post Issue 17.34 173.4 1559.4
Pre Issue 17.22 172.2  1536

 

 

  1. Performance, Prospects & Pains:
  Past Performance
Year Advances Deposits Net NPA NPA Ratio Equity Capital Net Worth  Total Borrowings Total Sales PAT NAV EPS NIM
  Rs Cr. Rs Cr. Rs Cr. % Rs Cr. Rs Cr. Rs Cr. Rs Cr. Rs Cr.   Rs %
H1 20 11297 12508 221.5 1.96 172.2 1536 816.7 44.2 89.19 3.86 3.43
2019 10615 15124 241 2 86 974 1483 (65.6) 73.5 (7.9) 2.8
2018 9184 14690 264 3 81 353.6 41.8 1422 (127) 43.68 (15.7) 2.57
2017 8000 14911 329 4 81 546.1 41.8 1617 (58) 67.5 (7.66) 2.11

 

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.
  1. Positioning of Debt:
    The company has no borrowings as per September, 30 2019
  2. 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.

Investor Category Subscription (times)
Qualified Institutional 55.31x
Non Institutional 198.69x
Retail Individual 10.94x
Employee Reservations  
Others  
Total Subscription 86.48x

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.

Investor Category Subscription (times)
Qualified Institutional 108.79x
Non Institutional 354.52x
Retail Individual 14.83x
Employee Reservations 5.81x
Others  
Total Subscription 111.91x

 

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