Motilal Oswal believes that given the strong promoter backing and turnaround in profitability, investor can subscribe to the IPO for listing gains.
South-based private sector lender CSB Bank's initial public offering (IPO) has been subscribed 4.35 times on November 25, the second day of bidding.
The public issue continued to receive strong demand from retail investors as their reserved portion was oversubscribed 21.53 times, data on the exchanges showed.
The portion set aside for non-institutional investors was subscribed 1.06 times and that of qualified institutional buyers by 26 percent.
The Rs 410-crore public offer has received bids for 5.02 crore equity shares against its IPO size of 1.15 crore shares, excluding the anchor book.
The public issue, which will close for subscription on November 26, consists of a fresh issue of shares to raise up to Rs 24 crore and an offer for sale of 1.97 crore shares by existing investors. The price band has been fixed at Rs 193-195 per share.
CSB Bank, backed by Fairfax India through FIH Mauritius Investments (FIHM), is one of the oldest private sector banks with a network of 412 branches spread across 16 states and four Union Territories, with a 1.3 million customer base.
It has a strong presence in South India, particularly Kerala (65 percent of branches) and Tamil Nadu (14 percent), where it has built strong relationships with its customers. This is well reflected in stable deposit base and improved renewal rate from 88 percent in FY17 to 97 percent in FY19 and 98 percent in first half of FY20, despite reducing rates this fiscal.
"At the upper price band, the issue is valued at 2.4 times H1 FY20 P/B on a post-issue diluted basis. After the acquisition by Fairfax group, the realigned operational strategy has helped the company to report profits in first half of FY20. The company is focused to improve profitability and growth going forward," Motilal Oswal said in a recent report.
The brokerage believes that given the strong promoter backing and turnaround in profitability, investor can subscribe to the IPO for listing gains.
CSB has a total gross loan book of around Rs 11,400 crore (first half of FY20) with SME/retail/wholesale contributing 29/46/24 percent of total advances. The bank has very strong focus on gold loans, which constitute 33 percent of total advances (around 72 percent of the total retail loan book). The management would continue to focusing on them along with SME segment. It also plans to open 425 branches in next five years to drive growth.The Kerala-based lender already raised Rs 184 crore from 24 anchor investors on November 21, including Omers Administration Corporation OAC Custody Account (SCV6), ICICI Prudential Mutual Fund, SBI MF, Aditya Birla Sun Life Trustee, Axis MF, Sundaram MF, HSBC and Ashoka India Opportunities Fund.LIVE NOW... Video series on How to Double Your Monthly Income... where Rahul Shah, Ex-Swiss Investment Banker and one of India's leading experts on wealth building, reveals his secret strategies for the first time ever. Register here to watch it for FREE.