Shares of CSB Bank soared 54 per cent during their stock market debut on Wednesday. The stock closed at Rs 300.4, up Rs 105.4 or 54 per cent, over its issue price of Rs 195.
The stellar listing follows the hugely successful initial public offering (IPO) backed by Canadian billionaire Prem Watsa’s Fairfax. The lender’s Rs 410-crore offering had garnered 87 times subscription.
The IPO was largely an offer for sale by existing shareholders such as ICICI Lombard General Insurance, HDFC Life Insurance, and ICICI Prudential Life Insurance.
While these institutions might be disappointed for leaving too much gains on table for IPO investors, the investment value of Fairfax has soared by 2.2 times in less than two years.
The Canada-based firm had picked up 51 per cent stake in the Kerala-based lender for Rs 1,200 crore back in February 2018. At current prices, the value of the stake stands at Rs 2,654 crore.
Fairfax will eventually have to bring down its stake from its current level of 51 per cent to 15 per cent. The Reserve Bank of India (RBI) has given the investment firm 15 years to do so.
CSB Bank’s total market value has soared to Rs 5,205 crore, compared to Rs 3,382 crore at the IPO price.
The lender’s market value is much higher than some of its South India-based peers, including Lakshmi Vilas Bank (market cap was Rs 690 crore), Dhanlaxmi Bank (Rs 380 crore), and even state-owned South Indian Bank (Rs 1,991 crore).
At the IPO price, CSB Bank was valued at nearly 2.4 times its book value. Most of its peers, such as RBL Bank, Federal Bank, and DCB Bank, are trading at price-to-book multiples of less than 2x.
The listing day gains by CSB Bank, formerly known as Catholic Syrian Bank, have been the best in 13 years for any banking stock. In 2006, shares of the Development Credit Bank, now DCB Bank, had soared more than 80 per cent.
Analysts say investors were attracted to CSB Bank’s strong network and brand presence in South India.
“Significant capital base, established SME business model, gold loan portfolio, and prudent risk management controls” were some of the strengths of CSB Bank, highlighted in a report by Reliance Securities. The bank has also extended current MD and CEO C V R Rajendran’s tenure by three more years. It has received the Reserve Bank of India’s nod for Rajendran’s extension.
Rajendran current tenure was scheduled to conclude on December 9, 2019, which is now extended till December 8, 2022.