CSB Bank IPO sails through on Day 1; retail quota subscribed 5.6 times

CSB Bank's Rs 410-crore initial public offerings (IPO) got fully subscribed on the first day of the offer on Friday.

The offer received bids for 1,20,87,450 shares against the total issue size of 1,15,54,987 till 5 pm.

The quota reserved for retail investors was subscribed by 5.6 times, while tranches reserved for Qualified Institutional Buyers(QIBs) and Non Institutional Investors saw negligible subscription.

The Kerala-based lender on Thursday garnered Rs 184 crore from anchor investors. The IPO will close on November 26.

CSB Bank, which aims to raise up to Rs 410 crore, has fixed a price of Rs 193-195 per share for the IPO.

According to a regulatory filing, CSB Bank has finalised the allocation of 94,54,080 shares at Rs 195 apiece to 24 anchor investors, including five mutual funds. Omers Administration Corporation OAC Custody Account (SCV6), ICICI Prudential MF, SBI MF, Aditya Birla Sun Life Trustee, Axis MF, Sundaram MF, HSBC and Ashoka India Opportunities Fund are among the anchor investors.

The shares are being sold to anchor investors at the upper end of the IPO price band of Rs 195 apiece.

Jaikishan Parmar, Senior Equity Research Analyst, Angel Broking said, “At the upper end of the price band, CSB Bank demands adjusted PB multiple of 2.4 times of Q2FY2020, which we believe is expensive considering the investment concerns. Similar banks are trading at lower valuation than CSB and have better return ratio (DCB Bank at P/ABV of 1.73x, Federal Bank at 1.36x, South Indian Bank at 0.5x, City Union Bank at 3.23x and Karur Vysya Bank at 0.8x). We have ‘Neutral’ view on the issue.”

On the other hand, Motilal Oswal Finanical Services gave ‘Subscribe’ rating to the issue. “Post the acquisition by Fairfax group, the realigned operational strategy has helped the company to report profits in 1HFY20. The company is focused to improve profitability and growth going ahead. We believe that given the strong promoter backing and turnaround in profitability, investor can ‘Subscribe’ to the IPO for listing gains,” the brokerage house said.