Fairfax deal: CSB says the wait was worth

KOCHI: Did Catholic Syrian Bank (CSB) gain from its nonchalant and a pretty long wait until it got a decent price for its shares?

After the first round of talks about nine months ago with the Canada-based Fairfax India Holdings Corporation, the bank held talks with several other ‘suitors’ including some private equity firms from Mumbai.

But as the bank claims, CSB board was never in a mood to give away the strategic stake for a bargain price. Nevertheless, the bank chose to stick to its guns and let the negotiations move on with all prospective buyers who came its way.

The CSB chairman, TS Anantharaman, told businessbenchmark.news that the price Fairfax has agreed this time – Rs140 per share, is substantially higher than the one offered during the last round of talks that failed.

The close to Rs1,200 crore Fairfax India Holdings is planning to bring to the Thrissur-headquartered bank is expected to boost the book value of its shares by about 20 per cent and almost double the bank’s capital adequacy ratio (CAR).

This will give the bank enough headroom to grow after a long period of unsteady and inconsistent journey. The deal has been dusted down after talks between CSB and Fairfax tripped on the pricing issue about nine months ago.

“The Rs140 per share offered by Fairfax this time is substantially higher than what they offered last time,” Anantharaman explained.

The price Fairfax has offered carries a premium of Rs38 to the current book value at Rs102 (as of September 30, 2017 – the latest financials available) and the fresh capital Fairfax brings in will boost the (diluted) book value to more than Rs121 per share.

Though market experts argue that the pricing should have been higher than Rs140 per share, one cannot ignore the fact that the shares of South Indian Bank (SIB), the much healthier neighbour, are being traded just above its book value.

“We cannot close our eyes to the reality that the Fairfax offering is close to 40 per cent premium to the current book value of CSB shares,” one analyst told businessbenchmark.news

The total equity of the bank will grow from the current Rs827.32 crore to Rs2007.37 crore once the deal is completed. The fruition of the deal is subject to the completion of required legal documentation and all applicable board, shareholder and regulatory approvals, including the approval from the Reserve Bank.

The infusion of fresh capital will give CSB the much-needed push whereas its capital adequacy will get a big boost from the current 11.09 per cent.  In fact, the lack of sufficient capital has hobbled the asset growth as the asset base at Rs16,35,742 crore has struggled to register a noticeable growth during the last quarter.


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