Fairfax-backed CSB Bank to take second stab at IPO as SEBI gives go-ahead
Photo Credit: VCCircle

CSB Bank Ltd, formerly Catholic Syrian Bank, has received a regulatory nod to float an initial public offering (IPO) -- its second attempt to go public.

This makes CSB the 23rd company to receive regulatory clearance this year for an IPO. The Securities and Exchange Board of India (SEBI) had approved 72 IPO proposals last year and 46 in 2017.

CSB’s previous plans in 2015 hit hurdles due to market volatility.

The IPO aims to facilitate exits for some existing shareholders after Canada’s Fairfax Financial Holdings Ltd, controlled by Indian-born Canadian billionaire Prem Watsa, bought a majority stake in February 2018.

CSB had filed its draft prospectus with SEBI on 9 August this year.

The IPO comprises an issue of fresh shares to raise Rs 30 crore and a sale of 19.78 million shares by existing shareholders.

In all, 26 individual and institutional shareholders including HDFC Life Insurance Co. Ltd, ICICI Prudential Life Insurance Co. Ltd and Federal Bank will sell their shares, partially and fully, in the proposed IPO.

The total IPO size is estimated at Rs 400-425 crore, two people close to the development told VCCircle. The issue may result in 12-13% stake dilution and value the bank at an estimated Rs 3,251 crore.

Fairfax will not sell any shares in the proposed IPO.

The bank will use net proceeds to augment its Tier-I capital 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 the Basel-III norms and other regulatory guidelines.

Axis Bank and IIFL Holdings are merchant bankers managing the proposed share sale.

CSB 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.

It had 1.3 million customers as of 31 March 2019. It operated through 414 branches and 277 ATMs across 16 states and four union territories as on 31 March 2019.

CSB has four main business verticals—SME banking, retail banking, wholesale banking and treasury operations. The bank is expanding its products suite, services and digital banking platform.

Retail lending (including gold loans) accounted for 45% of its total advances as on 31 March 2019. The SME banking business accounted for nearly one-third of the total advances.

The SME loan book grew from Rs 3,538.4 crore at the end of March 2017 to Rs 3,598.9 crore at the end of March 2018 but declined to Rs 3,473.3 crore as on 31 March 2019. CSB said growth in SME lending was impacted due to a difficult environment after the government’s shock banknote ban in November 2016 and the implementation of the Goods and Services Tax in July 2017.

The bank narrowed its loss for the year ended March 2019 to Rs 65.7 crore on total income of Rs 1,483.4 crore. This compares with a loss of Rs 127 crore on income of Rs 1,422 crore for 2017-18.

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