Federal Bank, HDFC Life and many others want to exit CSB Bank

Most small shareholders say ‘no’ to Offer for Sale

KOCHI: At last, CSB Bank (formerly Catholic Syrian Bank), which enjoys the rare distinction of being the first local bank to have allowed majority foreign ownership, at least in the recent history, is working on its initial public offer (IPO) and listing.

While most of the bank’s small shareholders with holdings below one lakh shares have spurned the idea of selling their ‘dear’ shares through the offer-for-sale (OFS) window offered by the bank in the run-up to its public offer, leading institutions including Federal Bank, HDFC Life Insurance, ICICI Prudential Life Insurance, Bridge India Fund and ICICI Lombard have decided to seize the opportunity to exit their investment in the bank through the OFS window coming up along with the Rs30 crore new share issue by the bank.

The bank hopes to sell around 2 crore shares through the offer for sale route as investors with a holding base of 11.928 per cent in the bank have already sent their consent to the bank to sell their shares.

Contrary to this, the total shares offered by the small shareholders are unlikely to exceed 90,000. Interestingly, TS Anantharaman, the former chairman who helmed the bank while the talks with Fairfax Holding, currently the largest shareholder with about 51 per cent, commenced and progressed leading to the latter’s acquisition of a majority stake in the bank, also has informed the bank about his intention to sell his holding in the bank that runs into a little over one lakh shares.

As per the Draft Red Herring Prospectus (DRHP) filed by the bank in connection with the initial public offer (IPO) and the OFS, only 11 small shareholders have opted to sell shares through the OFS window.

As per the terms of the OFS part of the issue, the shareholders holding on to their shares (barring certain exempted class of investors) will be disallowed to sell shares during a one-year lock-in period commencing from the date of DRHP.

Most large shareholders have acquired the CSB Bank shares in the range of Rs83.98 a piece (TS Anantharaman) and Rs255.85, being the acquisition by Way2Wealth Securities, during different periods.

The pricing of the issue has become a hot debating point in the market as the grey market for CSB shares has always been in multiples of its book value (BV) as against the other similar or better banks in the state, especially South Indian Bank (SIB) that are being traded for a song – at far less than half its book value (at least for SIB).

Given the context and more so after the revelation through the DRHP that CSB has posted losses for five consecutive years right from 2014-2015 to 2018-19 thus earning the bad reputation of a perennially loss-making bank, the IPO price discovery through the book building process is what the market is eagerly looking forward to.

Though it is a known fact that CSB has been struggling all these years to find a footing, the year 2016-17 was an aberration to the CSB narrative as the bank was able to record a profit, albeit Rs1.55 crore, for that year, but to the chagrin of the bank, that had to be restated and recorded as loss later earning CSB Bank the distinction of being a loss making institution for five consecutive years.

“We have incurred losses in recent financial years. We incurred a net loss of Rs579.91million, Rs1,270.88 million, and Rs656.89million for fiscals 2017, 2018, and 2019, as per our Restated Financial Information,” the bank noted in the DRHP thus proving the point.

The book value of CSB Bank shares, which had been at Rs67.46 as of 2017 end dropped substantially to Rs43.68 during FY2018 and from there with the help of the new capital brought in by Fairfax, the book value again improved to Rs73.54 as of 2019 end.

 

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