CSB to focus on expanding gold loans and SME vertical: CVR Rajendran

Last July, the Reserve Bank of India (RBI) gave Canadian billionaire Prem Watsa's Fairfax India Holdings an unprecedented permission to take a majority stake in the Kerala-based Catholic Syrian Bank. Armed with the Rs 1208-crore capital, the bank has rebranded itself to CSB Bank and is now ready to become the first bank to list in the local markets since RBL Bank’s debut in August 2016. The bank’s Rs 410-crore public issue primarily consists of an offer for sale of Rs 386 crore in which institutional investors like HDFC Life, ICICI Prudential Life, Edelweiss Tokio Life, ICICI Lombard General Insurance and Federal Bank are exiting the bank. The fresh sale of shares will lead to only Rs 24-crore infusion of capital for the bank which has a capital adequacy ratio of 22.77%, much higher than the 9% required.

In an interview to Joel Rebello, CSB Bank CEO CVR Rajendran said that the bank will stick to its known business like gold loans which make up 33% of the bank’s asset portfolio currently and will further reduce its loans to large companies to 15% of the loan book. Edited excertps:


What is the need for this share sale?
This is only a regulatory requirement. We have got enough capital from Fairfax and we don’t need more capital for the next two to three years. Basically, RBI wanted us to list before September 2019. We are a little behind because of the due diligence and procedural delays. There are only two unlisted banks in India, the other being Tamilnad Mercantile Bank. This is not going to augment our capital in any way because it will only give us Rs 25 crore. The basic reason for this issue is regulatory compliance.

Will Fairfax’s stake also come down with this issue?
Their shareholding at 50.09% which will come down to 49.74% after this issue. They will have to come down to 40% in the next five years and further to 30% in 10 years and to 15% in 15 years. So we now have five years for the stake to come down to 40% which is a long period. Fairfax had invested Rs 1208 crore in 2018 valuing the bank at Rs 2400 crore. The bank’s current valuation is Rs 3400 crore.

This is more of an offer for sale with some institutional investors exiting…
All the investors who are exiting had less than 2.5% and they are offering their entire shareholding. The insurance companies had an insurance selling tie-up with us and they came on board at our request and now that they have a good value, they are exiting. The insurance companies came on board in 2016 and are selling 6.5% out of the 12.1% dilution. HDFC Life, ICICI Prudential Life, Edelweiss Tokio Life and ICICI Lombard General Insurance are diluting, and there is also 1.68% held by Federal Bank for a long time and now that they are getting their price they are exiting. We have seen a good response from institutional investors. I am seeing a lot of interest from qualified institutional investors and I think it should be smooth sailing.


What future opportunities are you looking at for the bank?
There are many opportunities because we are not a big bank. We are looking at expanding gold loan and SME portfolios. Gold loans were dominated by NBFCs. Now that they have slowed, there is enough space for us to grow. Banks which can take quicker decisions can take capture more of the market. We being small, our decision taking is much faster than the bureaucratic bigger banks so we have a natural advantage in taking over the NBFC space immediately. We cannot fight State Bank of India in market share. We have to fight with small banks and NBFCs which is what we will do. We will play in niche markets and products..