CSB Bank (originally Catholic Syrian Bank) is a 98 year old private bank that has long focused on Southern India for growth, with operations mainly in Kerala, Tamil Nadu, Karnataka, and Maharashtra. For years it has been off the radar - a relatively small player with a focus on gold loans. But now all at once, it is an emerging star with its IPO generating excitement in the market - it has been over 9X subscribed on Day 3 of IPO subscription, and 33X subscribed in the retail investor segment.
As recently as FY18, the bank's numbers didn't look promising. The bank saw its Gross NPA% jump from 7.3% to 7.9% in 2018. Since then however, NPAs fell, to 4.9% in FY19 and further to 2.9% in FY20 till date. What changed? The new promoter brings capital and execution strength to the picture for CSB Bank. Promoter FIH Mauritius Investments Ltd (FIHM), a wholly owned subsidiary of Fairfax India Holdings Corporation, now holds 86,262,976 equity shares, representing 50.09% of total shares. The promoter has infused substantial capital into the bank. CSB received Rs 720.8 crore in FY19 and the remaining Rs 486.9 crore in Q2FY20. A well-capitalized bank is a different animal entirely, and the company has a strong foundation for growth.
It's worth keeping in mind however - this is a regional bank, with a geographical concentration in a few states, and an emphasis on gold loans and SME loans. SMEs are a riskier category, and while the environment is improving since the post-demonetization period, it remains a space that is harder to clearly assess for credit worthiness. Gold price volatilty is another factor.