CSB Bank to launch IPO this week; should you subscribe?

Kerala-based CSB Bank, promoted by Canadian billionaire Prem Watsa, has received Sebi's nod to launch an initial public offering (IPO), which will open for subscription on November 22, at a price band of Rs 193-195 per share. Formerly known as Catholic Syrian Bank, the private sector bank aims to raise Rs 410 crore at the upper end of the price band by issuing fresh equity shares and offer for sale of shares by existing shareholders.

The bank had filed draft red herring prospectus (DRHP) with the markets regulator Securities and Exchange Board of India (Sebi) in August and received its observations on October 1.

The lender plans to raise Rs 24 crore by issuing fresh equity shares in addition to an offer-for-sale of 1.98 crore shares held by existing shareholders, according to the document filed with Sebi. Axis Capital and IIFL Securtities are the lead managers to the issue.

Shares of CSB Bank will be listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), it said.

The bank intends to use fund proceeds from the fresh issue towards augmenting its Tier-1 capital base to meet future capital requirements. These are expected to arise out of growth in bank's assets, primarily loans and investment portfolio, and to ensure compliance with Basel III and other RBI guidelines, CSB Bank said.

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Headquartered in Thrissur, the bank is one of the oldest banks in India with a strong base in Kerala along with significant presence in Tamil Nadu, Karnataka, and Maharashtra. The bank has a network of over 426 branches and more than 257 ATMs across India.

Last year, Prem Watsa's Fairfax India Holdings Corporation through FIH Mauritius Investments Ltd (FIHM) had acquired 51 per cent stake in the bank for around Rs 440 crore, after which the Reserve Bank of India directed it to list its shares by September 30, 2019. This was the first time the central bank had approved an equity investment into a domestic private lender by a foreign company.

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The bank's promoter, FIHM, will not sell its shares in the IPO, while ICICI Lombard General Insurance, HDFC Life Insurance, ICICI Prudential Life Insurance, Federal Bank and Edelweiss Tokio Life Insurance will fully exit CSB through the IPO, as per Mint report.

For the financial year 2018-19, the bank posted a net loss of Rs 197.4 crore. However, for the six month period ended September 30, 2019, the bank's net profit after tax was Rs 44.27 crore.  As on March 31, 2019, the private sector lender's total advances stood at Rs 10,615 crore, while it had a deposit base of Rs 15,214 crore.

On the asset front, the bank's non-performing assets (NPAs) stood at Rs 240.68 crore for the financial year 2019, which represented 2.27 per cent of its net advances. The gross NPAs represented 4.87 per cent of total advances as on March 31, 2019.

Edited by Chitranjan Kumar