CSB Bank had a glowing stock market debut on Wednesday. The 98-year-old private lender's shares jumped 41% when it listed on the bourses at ₹275 apiece. The stock continued to extend gains through the trading session, rising as much as 57% before settling 54% higher from the issue price of ₹195 per share on the BSE. The S&P BSE Sensex closed 0.43% higher at 40,850.29 points.
CSB Bank, formerly known as the Catholic Syrian Bank, had received a roaring response from investors for its initial public offering (IPO). The issue was oversubscribed 87 times, as the bank received bids for 10.44 crore shares against the 1.15 crore shares offered for sale. The qualified institutional buyers category was subscribed 62.18 times, the non-institutional investors category 164.68 times. The retail category also saw a strong response and was subscribed 44.53 times.
CSB Bank has listed its shares mainly to comply with regulatory norms. The Reserve Bank of India (RBI) requires the promoter group to reduce its stake to 40% in five years, to 30% in 10 years, and to 15% in 15 years. Fairfax India, CBS Bank’s strategic investor and promoter, owns 50.1% stake in the private lender and did not tender shares in the IPO. However, Fairfax would be required to dilute its stake to 15% over 15 years to meet the RBI regulations.
Analysts are placing their bets on the new promoter and strong management for a turnaround in the private bank's performance. “CSB’s performance has not been encouraging in the past with a rise in NPA (non-performing assets) level. However, new promoter and strong management bring capital and execution strength to the table, which bodes well for future growth as well as earnings. Therefore, we assign a ’subscribe’ recommendation to the stock,” notes an ICICI Securities report.
Deval Shah of Kotak Securities notes that the bank has a well-established SME business, and its retail loans are driven by a strong gold loans portfolio. Shah adds that professional management, coupled with an independent board, will allow CSB Bank to streamline risk management controls for its credit exposures for long-term sustainable business development.
CSB Bank has notified exchanges about the reappointment of CVR Rajendran as the bank's managing director and chief executive officer for the next three years.
In the coming quarters, one key aspect of CSB Bank’s growth strategy will be its ability to convince investors of its transformation as a new-age private bank. Analysts point out that the lender has set up a specialised SME team to ramp up its assets business and focus on SME, agriculture, and retail loan growth. Also, recovery of bad loans to improve asset quality is also a key focus area for the lender.
The IPO of CSB Bank opened for subscription on November 22 and closed on November 26. The Kerala-based bank has raised close to ₹410 crore from the listing, and the price band had been fixed at ₹193-₹195 per share.