Capital Small Finance Bank opened its subscription to retail investors on February 07. The bidding will be closed on February 09. The issue is to raise capital aggregating Rs 523.07 crore.
The bank has set the IPO price band at Rs 445 – 468 per equity share, in which retail investors can bid for a minimum of 32 shares in a lot and in multiple of it thereafter, summing to Rs 14,976.
The issue will raise Rs 450 crores through fresh issue and Rs 73.07 crores through offer for sale. The shares of the bank will be listed both on NSE and BSE. The bank raised Rs 156.92 crore from the anchor investors by offering 3.3 million shares.
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According to the bank, the net proceeds raised from the issue will be used for increasing Tier-I capital to meet future capital requirements,
The Punjab-based bank is a small finance bank with having strong hold in semi-urban and rural areas of Himachal Pradesh, Rajasthan, Delhi, Haryana, and many others.
“Given the stronghold and experience of these entities in dealing with customers across these regions, the share of SFBs (small finance banks) will go up against the public and private sector banks. The sector’s loan portfolio is expected to see a strong growth of around 22-24% CAGR during FY2023-25 period as most of the SFBs have completed the transition phase and are likely to benefit from the operating leverage,” said StoxBox in an IPO note.
“Capital SFB already had its presence across the retail liability and asset side on account of operating as a local area bank before converting to a small finance bank. As a result, its retail franchise and reach has already been established across current and savings deposits as well as retail term deposits, thereby placing it in a good stead against other small finance banks. In comparison to other SFBs which are primarily focused on MFI lending and find it more difficult to penetrate into other products, Capital SFB has products, systems and processes in place to scale up operations across different products and geographies. Furthermore, Capital SFB has a CASA ratio which is similar to some of the leading private sector banks like HDFC Bank, Axis Bank, and ICICI Bank. Moreover, the lender’s gross NPA of 2.73% and net NPA of 1.36% as on September 30, 2023 acts as a testament to its streamlined underwriting processes, credit assessment, efficient collections, and risk management,” said StoxBox.
‘It is important to note that the lender’s PPOP has grown from Rs. 714.86 million in FY21 to Rs. 1,487.04 million in FY23 and stood at Rs. 753.84 million as of six months ended September 30, 2023. As the lender will utilize net proceeds of the fresh equity issue to augment its Tier-I capital base, its capital adequacy will enhance and lead to a stable leverage position. At the current P/BV multiple of 2.3x based on book value as on September 2023, we believe the company is reasonably valued and advise investors to “Subscribe” to the issue from a medium to long-term perspective,” concluded StoxBox.
Nuvama Wealth Management, Dam Capital Advisors (Formerly Idfc Securities), and Equirus Capital were the book-running lead managers to the issue.
