IndiaNivesh expects CSB Bank to embark on a growth trajectory of over 20 percent on business and profitability for the next couple of years.
Kerala-based private sector lender CSB Bank started off the first day at Rs 275 on the National Stock Exchange December 4, a premium of 41 percent over issue price of Rs 195.
At 10:01 hours IST, the stock was trading at Rs 292 on the exchange, up 49.74 percent over issue price with a volume of 68.66 lakh shares.
On the BSE, it traded at Rs 295, up 51.24 percent over IPO price, with volumes of 13.12 lakh shares.
The listing was bang on expected lines given the stellar subscription of 87 times and strong promoter background, experts said.
"Premium listing was justified, assuming turnaround in business efficiency which is expected to further improve going forward, and with overwhelming response to CSB Bank IPO," Prashanth Tapse, AVP Research, Mehta Equities told Moneycontrol.
Its market capitalisation at current share price stood at Rs 2,388.38 crore.
The Rs 410-crore public issue was opened for subscription during November 22-26, with a price band of Rs 193-195 per share.
The issue consisted 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.
CSB Bank is one of the oldest private sector banks in India with a history of over 98 years and a strong base in Kerala along with a significant presence in Tamil Nadu and Karnataka. 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.
The bank is promoted by FIH Mauritius Investments Ltd (FIHM) which bought 50.1 percent stake for Rs 1,200 crore in FY19. FIHM is a wholly-owned subsidiary of Fairfax India Holdings Corporation.
"CSB Bank has seen a remarkable turnaround after the new promoter took charge of its affairs in FY19. FIHM is originally promoted by Canadian billionaire Prem Vatsa, known for making strategic investments turning businesses around. The impact is visible in the second half of FY20 numbers where CSB returned to the black after posting losses for three consecutive years," IndiaNivesh said.
The brokerage expects CSB Bank to embark on a growth trajectory of over 20 percent on business and profitability for the next couple of years. "There is ample scope for it to get re-rated at higher a multiple of 2.5x to 2.7x P/BV after listing," it said.
AUM Capital also said bank's strong management with thoughtful business strategies, its strong risk management frameworks, softening interest rate cycle coupled with Government’s focus on the ailing sectors such as Infrastructure, Power, Iron & steel, etc. and RBI’s vigilance on Banks’ asset quality would lead to benefit the bank in the long run.
CSB has a total gross loan book of around Rs 11,400 crore in first half of FY20) with SME/Retail/Wholesale contributing 29 percent/46 percent/24 percent of the total advances. The bank has very strong focus on gold loans which constitute 33 percent of the total advances (around 72 percent of the total retail loan book).
"CSB would continue focusing on them along with SME segment. It also plans to open 425 branches in next 5 years to drive growth," said Motilal Oswal.
The bank is continuously working on its technological front with the increasing acceptance of digital transactions and upgrading their technology infrastructure.CSB operates through network of over 412 branches excluding 3 service and 3 asset recovery branches and 290 ATMs across India and also delivers through various channels such as micro ATMs, debit cards, internet banking, mobile banking, point of sale services and UPI.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.