CSB Bank trades lower for fifth straight day, down 16% since listing

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Shares of the recently listed CSB Bank slipped for the fifth straight day, down 3 per cent at Rs 251 on the BSE on Wednesday, after a strong debut. The stock of the private sector bank has fallen 16 per cent since it's listing on December 4, 2019. In comparison, the benchmark S&P BSE Sensex was down 1 per cent during the week.

The Kerala-based bank soared 54 per cent during its stock market debut at Rs 300.4, over its issue price of Rs 195. The stellar listing followed the hugely successful initial public offering (IPO) backed by Canadian billionaire Prem Watsa’s Fairfax. The lender’s Rs 410-crore offering had garnered 87 times subscription.

Veteran investment banker Vallabh Bhanshali, chairman of Enam group, non-resident Indians - Yusuffali Musaliam Veettil Abdul Kader, Satpal Khattar, Lal Arakulath Sankappa and Zafar Ahmadullah – have holding stake in the range of 1 per cent to 2 per cent in CSB Bank, according to shareholding pattern disclosed by the bank.

“At the upper end of the issue price of Rs 195, the stock is valued at 2.17 times its 1HFY20 book value. While other small and medium sized banks are also valued at similar or even lower than CSB Bank, we feel the management bandwidth and strong capital adequacy will give the bank an extra edge over others in the medium term,” analysts at SMC Global Securities said in an IPO note.

Further the bank’s strategy to pick and choose sectors with low risk and grow the book will be margin and Return on Equity (ROE) accretive. Though the valuations are on a little higher side, we feel there is enough growth options for the banks," the brokerage firm had said.

“The last few years have been transformational for the bank with declining influence of trade union, sharp improvement in capital position and strengthening balance sheet and profitability. Amidst a weak operating environment, the next phase could be more challenging. Moreover, valuation at 2.4 times of 2HFY20 adjusted book looks to be stretched with established players like RBL, Federal, and DCB with higher RoA levels trading at lower PB multiples of below 2 times”, analysts at Reliance Securities said in a note.