India: Fairfax-backed CSB Bank said to file IPO papers, may raise up to $72m

Photo: Mint

Kerala-based private lender CSB Bank, earlier known as The Catholic Syrian Bank Ltd, is set to file its draft initial public offering (IPO) papers, said two people aware of the development.

Last year, Canadian billionaire Prem Watsa’s Fairfax acquired a 51% stake in CSB Bank for around $168 million, following the Reserve Bank of India’s (RBI) first such approval given to a foreign firm.

The RBI also instructed the bank to list its shares by 30 September this year.

“Work on the draft red herring prospectus is in the final stages. The document is likely to be filed this month,” said the first person cited above, requesting anonymity as he is not authorized to speak with the media.

The IPO will largely be an offer for sale by existing investors, said the second person cited above.

“They (the bank) don’t need primary capital. So, the IPO will largely be existing investors selling their shares. They are currently in the process of finalizing the list of shareholders who are willing to sell their shares in the IPO. Once that is complete, they will file the document,” he said, adding that some part of the IPO could be primary fundraising, if the bank is unable to find enough shareholders who want to sell shares.

The proposed share sale is expected to be around ₹500 crore in size, the second person cited above said. Axis Capital is advising the bank on the transaction.

Emails sent to CSB Bank and Axis Capital did not elicit any response.

This will not be the first time the bank is filing for an IPO. In March 2015, the private sector lender had filed a draft red herring prospectus to raise ₹400 crore through an IPO.

In June 2015, markets regulator Securities and Exchange Board of India had approved its public offering.

However, the bank eventually let the approval lapse.

For the year ended 31 March, the bank reported a revenue of ₹1,347.52 crore, as against a revenue of ₹1,296.8 crore in the previous year.

In fiscal 2019, the bank reported a loss of ₹197.42 crore, against a loss of ₹97.47 crore a year ago.

CSB bank has a network of more than 410 branches and 283 ATMs across India.

In recent years, several private equity-backed banks have initiated share sales.

Among the universal banks, Bandhan Bank Ltd and RBL Bank Ltd—both backed by private equity investors—went public in highly subscribed share sales.

In 2016, RBL Bank Ltd (formerly Ratnakar Bank) received a stellar response to its ₹1,211 crore IPO, with the three-day issue drawing subscriptions that were 69.57 times the issue size.

This was the highest overall subscription among IPOs of private sector banks.

RBL Bank counted several private equity firms such as Gaja Capital and Norwest Venture Partners among its shareholders.

Last year, Bandhan Bank’s ₹4,470 crore IPO was subscribed 14.6 times. Bandhan bank is backed by large institutional investors such as the World Bank arm International Finance Corporation.

Apart from the universal banks, many small finance banks, too, have listed on the Indian stock exchanges in recent times. These include Warburg Pincus and Kedaara Capital-backed AU Small Finance Bank, Equitas Holdings Ltd and Ujjivan Financial Services Ltd.

More small finance banks are expected to list on Indian bourses soon to meet the central bank’s regulatory requirements.

Mint reported on 2 June that Fincare Small Finance Bank has initiated a formal process to appoint investment banks and other advisers for its IPO.

Maharashtra-based Suryoday Small Finance Bank is another small finance bank which has been talking to investment banks to start preparations for an IPO, Mint reported.

Meeting the regulatory norms will also mean that small finance banks such as Equitas and Ujjivan, which listed their holding companies, too will have to separately list their small finance bank units.

In October, RBI asked Equitas and Ujjivan to list their SFB units to comply with its norms, which mandated that a small finance bank must be listed within three years of the launch of operations.

Equitas and Ujjivan have to list the SFBs by September 2019 and January 2020, respectively. In September 2015, RBI issued 10 SFB licences.

This article was first published on livemint.com.