Started in 1920, CSB Bank Limited is a Kerala based one of the oldest private sector bank in India. The bank has a significant presence in Kerala, Karnataka, Tamil Nadu and Maharashtra. CSB Bank Ltd has four 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. The bank has 1.3 million customers, which are majorly from Retail, SME and NRI segments. It has a wide product and services range which are delivered through multiple channels such as 290 ATMs, 412 branches and other micro ATMs, internet banking, debit cards, mobile banking, UPI and POS (Point of Sale). CSB Bank has a presence across 16 states and 4 UTs (Union Territories). In the year 2018, Watsa's Fairfax India Holdings (FIH) Corporation has acquired CSB Bank with 51% stake (around Rs 440 cr). Currently, the bank is focussing on a new business model to work as a full-service new age private sector bank with the help of its promoter, FIH Mauritius Investments Ltd (FIHM). As per financial performance, CSB Bank has posted total income/net profits of Rs. 1617.50 cr. / Rs. - (57.99) cr. (FY17), Rs. 1422.22 cr. / Rs. - (127.09) cr. (FY18) and Rs. 1483.43 cr. / Rs. - (65.69) cr. For upto Q2 of FY20, company has posted profit of Rs 44.27 Cr on total revenue of Rs 816.71 Cr. So company has posted loss over last couple of years and posted profit in first two Quarter of FY20. CSB Bank has posted an average EPS of Rs. - (4.93) and average RoNW of - (5.49)% for last three fiscals. Issue is priced at a P/BV of 2.19 as per NAV of 89.19 on 30.09.19. For FY19, earnings were negative so P/E is not available. If we attribute latest earnings of FY20 on fully diluted equity post issue, then asking price is at a P/E of 38.2. CSB Bank has gross and net NPAs as of FY19 4.87% and 2.27% respectively, which were around 7.25% and 4.12% in FY17. So company has made significant improvements. As per RHP, industry average P/E ratio is 18.8 and listed peers comparison shown in above table. So issue looks aggressively priced when we look previous year results, but as per current year earnings, IPO is fully priced. On BRLM's front, for Axis Capital Limited and IIFL Holdings Limited, both have handled around 41 IPOs in last three fiscals, and from last 10 IPOs, five opened below issue price and remaining opened above issue price with 1% to 60% premium on the day of listing. As of now, from last 10 IPOs, five are trading below issue price and remaining above issue price. ( As on 19.11.2019 ) As per financials, results are improving, RoNW is - (4.48)% for last three fiscals and company has shown loss in last three FYs. But, company has made significant improvements in NPAs and Net Interest Margin when compared with FY17. Performance of BRLM is average. So we give SUBSCRIBE rating to this IPO.
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