Equity Name: Catholic
Syrian Bank (CSB Bank) (IPO Analysis)
About : Incorporated in 1920, CSB is one of
the oldest private sector banks in India with a history of over 98 years,
transforming to a new age private bank backed by a new investor – Fairfax India
through FIH Mauritius Investments Ltd (FIHM). It offers a wide range of
products and services to its overall customer base of 1.3mn as on September 30,
2019, with particular focus on SME, Retail and NRI customers.
Given
its focus on quality of service and nurturing long term relationship with their
customers, CSB has developed a well-recognized and trusted brand in south
India, particularly in the states of Kerala (65% of branches) and Tamil Nadu
(14%). The bank has four principal business area, namely, SME baking, Retail
Banking, Wholesale Banking and Treasury operations. As on September 30, 2019,
CSB has a network of 412 branches (excluding 3 service and 3 asset recovery
branches), 290 ATM’s and various alternate channels such as micro ATMs, debit
cards, internet banking, mobile banking, point of sale services and UPI.
CSB Bank
Ltd has four main business areas, which are:
1. SME
Banking: Under SME Banking, the bank offers banking services to vendors, allied
businesses, agriculture, financial institutions, and dealers of corporates. The
products offered to this category include working capital loans, letters of
credit, term loans, bank guarantees and invoice/bill discounting.
2.
Wholesale Banking: CSB Bank fulfils business needs of large &
mid-size corporates, and business entities of Rs 250 million and more credit
requirement under Wholesale Banking category.
3. Retail
Banking: Under the Retail Banking category, the bank offers retail lending and
deposit products to retail and NRI customers. The lending products include
vehicle loans, gold loans, loans against properties, education loans,
agricultural loans, personal loans and housing loans to retail and NRI
customers. The deposit products include corporate salary accounts, recurring
deposits, savings accounts, current accounts, and fixed deposits.
4. Treasury
Operations: Under Treasury Operations, the bank deals with
asset-liability management, statutory reserves management, trading &
investment of securities, foreign exchange, and liquidity management
activities. This category is aimed to maintain liquidity requirement to comply
with the CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio), which
are RBI Mandates.
The company
also has a contractual arrangement to distribute life insurance products of
HDFC, Edelweiss Tokio, and ICICI Prudential Life Insurance Company Ltd and
general insurance products of Reliance General Insurance Company Ltd.
Company Promoters: The Promoter of the Bank is FIH Mauritius
Investments Ltd ("FIHM")
Company Financials:
|
Particulars
|
For the year/period ended (Rs. in Million)
|
|||
|
30-Sep-19
|
31-Mar-19
|
31-Mar-18
|
31-Mar-17
|
|
|
Total Assets
|
1,73,232.58
|
1,64,534.60
|
1,53,346.62
|
1,57,700.26
|
|
Total Revenue
|
8,167.14
|
14,834.33
|
14,222.26
|
16,174.96
|
|
Profit After Tax
|
442.72
|
(656.89)
|
(1,270.88)
|
(579.91)
|
Objective of the Issue:
- To augment Bank's Tier-I capital base to meet the Bank's future capital requirements,
- To achieve the benefits of listing the Equity Shares on the Stock Exchanges and Offer for Sale.
Summary:
- Net NPA reduced to 2 % from 4 % in FY17
- One of the Highest CRAR in the Industry of 22.8 % post the capital
infusion by Fairfax India
- Provisioning coverage ratio increased to 79.5 % from 66 % in FY
17.
- Bank has strong focus on Gold Loans.
- Stable Deposit base with high concentration in south India.
- Company plans to open 425 branches in next five years.
- Grey Market premium is Rs 50 to Rs 60.
- This IPO seems to be fairly valued.
- Seeing the Grey market price it seems to have listing gains of Rs 3000 to Rs 3500 per lot.
Conclusion:
Company looks capable to replicate the growth of past couple of
years. Despite weak market sentiments, especially towards financial sector,
issue pricing is not aggressive, one can apply in the IPO as a quality mid-cap
holding in one’s portfolio.
Verdict:
Seeing the current
market conditions one can apply this IPO for listing gains and for long term preview.
Other Key Details:
Risk and concerns
- Regional concentration in southern India, especially Kerala (67% of deposits and 32% of advances). Hence any adverse change in the economic, political, or geographical conditions in Kerala and other Southern states can impact its business.
- High exposure in Gold loans – as of Sept’19 gold loans contributed 33% of CSB’s total loans. Hence, any sharp volatility in gold prices can impact the financials or cash flows of the company.
- Volatility in interest rates could have an adverse effect on its net interest income, net interest margin and overall financial performance.
Peer Comparison:
Sources:
Various publications
Disclaimer: The
information provided herein is based on publicly available information and
other sources believed to be reliable, but involve uncertainties that could
cause actual events to differ materially from those expressed or implied in
such statements. The document is given for general and information purpose and
is neither an investment advice nor an offer to sell nor a solicitation. While
due care has been exercised while preparing this document, we do not warrant
the completeness or accuracy of the information. We will not accept any
liability arising from the use of this material. The recipient of this material
should rely on their investigations and take their own professional advice.
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