Shares of CSB Bank Ltd will be in focus on Friday morning as the Kerala-based bank informed stock exchanges that its promoter has received approval from the Reserve Bank of India (RBI) to retain a 26 per cent stake in the lender, instead of 15 per cent as advised by the central bank earlier, CSB said on Thursday.
"We wish to inform you that Reserve Bank of India, vide letter dated November 29, 2023, approved amendment to the dilution schedule of shareholdings of FIH Mauritius Investments Ltd (FIHM) promoter of the bank, in the paid-up capital of the Bank which is in line with the extant RBI Master Direction," the bank said.
As per the amendment, FIH Mauritius Investments should bring down its shareholding to 26 per cent of the paid-up equity capital of the bank within 15 years from the date of completion of investments instead of 15 per cent, as advised by RBI at the time of approval of the investment proposal of FIHM in the year 2018.
At present, FIH Mauritius Investments Ltd (FIHM), owned a 49.72 per cent stake in the bank. It needs to bring this stake down to 26 per cent within 15 years from the date of completion of investments.
The RBI's latest move was following its legal battle with the promoter of Kotak Mahindra Bank, Uday Kotak. The regulator later permitted the bank promoters to retain up to 26 per cent in banks. IndusInd Bank's promoters also benefited from the rule change, after they were given regulatory approval earlier in the year to raise their stake to 26 per cent in the bank.
The CSB Bank stock is up 60 per cent year-to-date. Post its Q2 results, the CSB Bank management said the bank would grow 50 per cent faster than the banking system, YES Securities noted, which maintained its 'Buy' rating on the stock in October with a target of Rs 440. The stock closed at Rs 387.80 on Thursday, up 1.6 per cent.
CSB Bank is facing stiff competition from larger peers as the increased interest rates is not passed on to yield completely, while higher interest expenses are straining spreads, Arihant Capital said in another October note.
"Opening more branches is a good strategy to increase their franchise, however, timing of that strategy’s execution is not falling in the bank’s favour. We maintain long term positive outlook on the bank backed by its business model and a bottoming out NIMs," it said.