Fairfax-backed CSB Bank’s Rs 410-crore initial public offering (IPO) was subscribed a whopping 86.89 times last month. The category reserved for qualified institutional buyers (QIBs) was subscribed 62.18 times, non institutional investors (NIIs) 164.68 times and retail individual investors quota was subscribed 44.25 times, the exchange data shows.
Formerly known as Catholic Syrian Bank, the Kerala-based lender has presence in Maharashtra, Tamil Nadu, and Karnataka. With a customer base of nearly 1.3 million people (as on March 31, 2019). Its credit portfolio includes sectors like agriculture, MSMEs, education, and housing.
Given the bank’s consistent improvement in asset quality and turnaround performance in this financial year, analysts recommended subscribing to the issue, albeit with riders.
“The stock can be a good play from a long-term perspective… Nearly 60 per cent of the bank’s portfolio is made of SME and secured gold ornaments which are safe bets. Going ahead, we expect the bank to report better return on equity (RoE) and consistently improve its performance,” said Yuvraj Choudhary, an analyst at Anand Rathi Shares and Stock Brokers.
"Post the acquisition by Fairfax group, the realigned operational strategy has helped the company to report profits in 1HFY20. The company is focused to improve profitability and growth going ahead. We believe that given the strong promoter backing and turnaround in profitability, investor can subscribe to the IPO for listing gains," analysts at Motilal Oswal Financial Services (MOFSL) had written in the IPO note.
Mona Khetan, a banking Analyst at Reliance Securities, too, advise investors to book profits, as the bank will take time to deliver even a 1 per cent return on assets (RoA) amid a weak operating environment, with higher exposure to the MSME segment. "It would be better to buy shares of other bank with more established RoA like Federal Bank, RBL Bank and DCB, which trade at a discount to CSB Bank," the analyst had said.
On the other hand, ICICI Securities says new promoter and strong management brings capital and execution strength on the table which bodes well for future growth as well as earnings.