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Fairfax-backed CSB Bank\'s IPO receives strong response, subscribed nearly 87 times
Photo Credit: VCCircle

CSB Bank, formerly Catholic Syrian Bank, saw its initial public offering (IPO) lapped up with high demand across investor categories.

The offering of 11.55 million shares, excluding the anchor allotment portion, received bids for a little over 1 billion shares on the third and final day, stock-exchange data showed. The book was subscribed 86.81 times.

This is the second-best investor turnout in an IPO in nearly two years. Last month state-run Indian Railway Catering and Tourism Corp. (IRCTC) saw its IPO subscribed nearly 112 times.

Last year, Amber Enterprises India Ltd, which makes white goods for global players like Whirlpool and Daikin, was subscribed 165 times in January 2018 while Apollo Micro Systems’ Rs 160-crore IPO was covered 248 times the same month, setting a new record.

As for CSB Bank’s IPO, qualified institutional buyers bid for more than 62 times the 6.3 million shares reserved for them.

The quota of shares reserved for retail investors was covered nearly 44 times while non-institutional investors such as corporate houses and affluent individuals placed orders for 165 times the shares reserved for them.

Non-institutional investors are typically quiet for the first two days of an IPO and rush to bid on the final day as they usually borrow money to invest. High net-worth individuals (HNIs) borrow short-term capital from various avenues, excluding banks, to fund their IPO applications and deploy only a small fraction of their own capital upfront.

On the grey market, shares of CSB Bank were quoting at a premium of Rs 65-75 apiece over the price band, two grey market dealers told VCCircle.

The IPO opened last Friday with a price band of Rs 193-195 for the share sale.

The IPO was fully subscribed at the end of the first day helped by demand from retail investors. It picked pace on the second day on Monday after receiving 4.34 times demand for shares on offer.

On Thursday, the bank raised Rs 184.36 crore ($25.7 million) from a bunch of anchor investors including a Canadian pension fund and Indian alternative investment funds.

CSB Bank, controlled by Indian-born Canadian billionaire Prem Watsa’s investment firm Fairfax Financial Holdings Ltd, is seeking a valuation of Rs 3,600 crore ($502 million) through the IPO.

The public offer comprised a fresh sale of shares worth Rs 240 crore and a secondary sale of a little more than 19.77 million shares by 26 shareholders worth up to Rs 385 crore.

Existing individual and institutional investors selling stake in the IPO include HDFC Life Insurance Co. Ltd, ICICI Prudential Life Insurance Co. Ltd, Federal Bank Ltd, Bridge India Fund, Satellite Multicomm Pvt. Ltd and ICICI Lombard General Insurance Co. Ltd.

Fairfax, which acquired a 51% stake in CSB last year, is not selling any shares in the IPO. Fairfax’s 40% stake out of its total holding will remain locked in for five years in line with regulatory requirements.

Venture capital investor Volrado Venture Partners Fund II, which acquired CSB Bank shares in May 2017, is exempt from the lock-in period but is not selling any shares.

CSB Bank was originally incorporated in November 1920 and is one of the oldest private-sector banks in India. It has a strong base in Kerala, Tamil Nadu, Karnataka, and Maharashtra.

The bank will use net proceeds to augment its Tier-1 base for its future capital requirement, which it expects to arise from growth in assets, primarily lending operations.

The proceeds from the fresh sale of shares will also help the bank to ensure compliance with Basel-III norms and other regulatory guidelines.

Axis Bank and IIFL Holdings are merchant bankers managing the bank’s share sale.

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