“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.