Catholic Syrian Bank to raise Rs 400 crore capital through QIB

Will allocate up to 40 million shares to the investors; process to be completed by October

Kerala-based Catholic Syrian Bank (CSB) Board has approved a proposal to raise capital by way of the qualified institutional buyer (QIB) allocating upto 40 million shares to the investors. The Bank which is seeking around Rs 400 crore to fund its growth till March 2019, said the process will be completed by October.

The development comes two months after Fairfax called off CSB's investment plan due to a valuation issue. Canadian investor Prem Watsa's Fairfax Financial Holdings was planning to invest around Rs 1,000 crore in CSB for a 51 per cent stake.

Speaking to Business Standard C V R Rajendran, managing director & chief executive of the CSB said that the Board has given an approval for issue preferential shares by selling upto 40 million shares. The prices will be decided by way of the book-building process.

Depending upon the price, the bank may either issue 20 million shares or a little more, or if the price is good it can go upto 40 million shares also, Rajendran added. If the bank issues all the 40 million shares, it will be 33 per cent dilution.

The bank has appointed JM Financial as merchant banker and in the coming weeks, it is planning to meet the potential investors.

"We require around Rs 400 crore till March 2019 to support our growth plans," said Rajendran, who expects the process to be completed by October end.

Rajendran said the Bank is looking at QIBs for raising the funds. The Bank already has about Rs 3,000 crore of surplus funds to be deployed.

"We have planned about 27% growth in the next year advances also. Taking that into consideration, Rs 400 crore would be needed," said Rajendran.

The year 2016-17 has been a significant year for CSB as it could get back to profitability, helped with treasury profits, after two years of consecutive losses.

"Hopefully we should end up with a marginal profit this year also, without treasury profit," said Rajendran.

One of the 'Crucial Cs' in this regard, which the Bank is focusing are Capital augmentation. A solid capital base is essential to ensure future growth and we expect significant strategic investment to come to the bank. This will be taking care of its growth plans for the next 5 years.

Bank's Credit Deposit ratio is currently one of the lowest in the industry and this has pushed Bank's NIM to below 2% levels.

The bank is planning exponential growth in focus areas such as Gold loans, SME and retail loans.

"Not to repeat from past mistakes, we have strengthened the credit processes following CRIS recommendations. We will be setting up two-wheeler financing vertical, replicating NBFC model," he added earlier.

In terms of CASA growth, CSB need to improve so that the cost of funding is brought down, he added