New Delhi: The initial public offering (IPO) of Kerala-based CSB Bank, formerly known as Catholic Syrian Bank, opened for subscription on Friday. After struggling for many years due to lack of capital, the bank is gradually coming out of trouble, backed by fund infusion from Canada-based Fairfax group. The share sale ends 26 November and the shares would be listed on 4 December.
The lender has fixed the price band of its IPO at ₹193-195 a share, aiming to mop up ₹410 crore from the issue.
Mumbai-based Angel Broking feel the IPO’s pricing is expensive and have a neutral view on the issue.
“At the upper end of the price band, CSB Bank demands adjusted price to book multiple of 2.4x of Q2FY2020 adjusted book value, which we believe is expensive considering the investment concerns. Similar banks are trading at lower valuation than CSB and have better return ratio (DCB Bank at price-to-book value of 1.73x, Federal Bank at 1.36x, South Indian Bank at 0.5x, City Union Bank at 3.23x and Karur Vysya Bank at 0.8x). Gold financiers with better return profile and pan India presence are trading at 2.6x of Q2FY2020 Book Value,” said an analyst with the brokerage, advising investors to wait for price discovery before taking any investment decision.
Ahead of the initial share sale, the bank raised over ₹184 crore from anchor investors on Thursday. Pointing out the investment concerns, the brokerage firm said the bank has regional concentration in southern India, particularly Kerala, which accounts for 66.7% of its deposits.
The operations are concentrated in two states and any adverse sustained economic downturn and political unrest/disruption could change repayment behavior of the borrowers, the brokerage said.
Besides, the analyst also feels that the bank’s exposure to non banking and housing finance companies is a little higher. The bank has an 18.2% exposure to NBFCs, including HFCs.
Further, the bank has a significant exposure, 33.2%, to gold-based lending, in a cut-throat market. Any downward movement in gold prices or any disruptions in the gold market could cause potential erosion in the bank’s loan portfolio, Angel Broking said.
