Fairfax makes a killing of Rs340cr from CSB Bank share deal

FIH holding in bank has fallen from 51% in 2018 to 40% now

KOCHI: Fairfax India Holdings (FIH) (Mauritius Investments) has made a killing of Rs340 crore on June 27 from the bulk sale two days ago of 1.686 crore shares or 9.72 per cent of the Thrissur-based CSB Bank, where the former still remains the largest shareholder by far.

As per the trading records, the shares were changed hands at an average price of Rs352.75 per share taking the total value of the bulk deal to Rs592.62crore.

FIH has bought majority shares of CSB Bank shares (formerly Catholic Syrian Bank) in 2018 at Rs140 per share, which means FIH has made a profit of Rs212.75 on each share sold.

Holding in CSB Bank falls

It was following the initial public offer (IPO) in December 2019, required by RBI as a regulatory condition, the holding of FIH got marginally diluted from 51 per cent to 49.72 per cent.

And the recent bulk sale has brought the holding of FIH further down from 49.72 per cent to around 40 per cent. As per the extant regulations, FIH, as the main promoter of CSB Bank, will have to reduce its ownership or voting rights in the bank to 26 per cent of the paid-up capital within 15 years of buying into the bank.

It was in February 2018, FIH bought 51 per cent of CSB Bank (then Catholic Syrian Bank) shares at Rs140 per share, taking the value of the deal to about Rs1,200 crore.

Amansa, the largest buyer

The largest buyer in the FIH bulk sale was Amansa Holdings Pvt Ltd, which bought 82.77 lakh shares and the other buyers include Abu Dhabi Investment Authority (ADIA), Abu Dhabi’s sovereign wealth fund,  ICICI Prudential MF, Goldman Sachs Investments (Mauritius), Edelweiss Tokyo Life Insurance Company Ltd,  India Acorn Fund Ltd, DSP Mutual Fund, and Ashoka India Equity Investment Trust.

CSB Bank shares gained Rs13.35 or 3.65 per cent to finish at Rs379 before the closing of trading on Friday (June 28), the last trading day in June as well as that of the first quarter of the current financial year 2024-25 (FY25).

Despite the smart gain recorded on Friday, CSB Bank shares are still far from its 52-week high of Rs422.25. The 52-week low recorded by the share is Rs279.20 and the current market capitalization is Rs6,230 crore.

There are market observers who are struggling to understand the logic behind the FIH decision to sell the shares at Rs352.75 each, especially since several market experts strongly believe CSB Bank shares have a much higher price target. “Why FIH chose this price to sell,” they quipped while talking to businessbenchmark.news.

First time in banking history

The acquisition of a 51 per cent stake by the FIH Mauritius, the Canadian company led by Prem Watsa,  in Catholic Syrian Bank (now CSB Bank), in February 2018 was indeed viewed as a landmark event in the history of the country’s banking sector.

This acquisition marked the first time that a foreign entity acquired a controlling stake in an Indian private sector bank since RBI allowed such investments.

In fact, the RBI took an unconventional view on this deal, deviating from traditional norms, in order to ‘bail out’ the financially troubled Catholic Syrian Bank.

The bank had been incurring losses year after year and facing a depletion of capital prior to 2018. CSB Bank has since then witnessed a ‘course correction’ and has been reporting good results for  the last couple of years though there are differing views expressed by certain corners against the bank.

Reportedly, those are primarily in terms of the ‘stand taken by the management against its leagcy employees’ and the over-dependence of the bank on gold loans that helped the bank rewrite the bank’s pretty long history of ‘losing streak’.