Founded in 1999, Capital Small Finance Bank Limited is a small finance bank that operates in semi-urban and rural areas through branches. In 2015, it became the first microfinance entity to receive a small finance bank license.
Capital Small Finance Bank is dedicated to catering to the needs of middle-income customers, whose annual income falls between ₹0.4-5 million. Their goal is to establish themselves as the preferred banking partner for this customer segment by offering a diverse range of products, exceptional customer service, easily accessible physical branches, and seamless digital channels.
Capital Small Finance Bank is headquartered in Jalandhar, Punjab and has strategically expanded its SFB operations in northern states of India such as Punjab, Haryana, Rajasthan, Delhi, Himachal Pradesh and UT Chandigarh.
As of June 30, 2023, Capital Small Finance Bank had a presence in five states and one union territory, with a total of 172 branches and 174 ATMs. The bank’s branches were predominantly located in rural and semi-urban areas, covering 24 districts, and serving approximately 75.90% of the total customers, both in terms of credit and deposits. This suggests that the bank has a well-defined niche catering to the middle-income group, with a special emphasis on rural and semi-urban areas.
As of March 31 and June 30, 2023, respectively, 99.82% and 99.84% of the bank’s loan book was secured, with 85.16% and 84.66% of loans secured by immovable properties.
Capital Small Finance Bank had an average lending amount of ₹ 1.23 million for agriculture, ₹ 1.82 million for MSME and trading, and ₹ 1.16 million for mortgage products as of March 31, 2023. The bank currently employs a total of 1827 individuals as of June 30th, 2023.
OBJECTIVE
- A significant portion of the net proceeds will be used for paying fees to BRLMs and legal counsel.
- The bank will utilise the IPO funds to cover expenses related to the listing process like advertising and marketing expenses, Registrar’s fees, SCSB’s fees etc.
POSITIVE
- Market opportunity: Growing SFB sector catering to the underbanked population offers significant growth potential.
- Attractive valuation: Competitive IPO price band compared to some listed peers.
- Strong track record: Proven financial performance and good asset quality demonstrate stability and potential.
- Microfinance expertise: Deep understanding of the underserved segment and established relationships.
- Government support: SFBs benefit from government initiatives promoting financial inclusion.
- Potential for diversification: Expanding beyond microfinance can mitigate risk and attract new customers.
NEGATIVE
- Limited operational history: Less data compared to established banks, making future performance less predictable.
- Reliance on microfinance: Vulnerable to economic downturns and rural sector issues.
- Intense competition: Fierce competition in the banking sector, especially microfinance, posing challenges for market share and profitability.
- Regulatory uncertainty: Changes in SFB regulations could impact operations and profitability.
- Economic risks: Downturns could negatively impact loan repayments and asset quality.
- Rising interest rates: May increase borrowing costs and impact margins and profitability.
- Technological disruption: New technologies and fintech players could disrupt the traditional banking landscape.
Capital Small Finance Bank Limited IPO Timeline
| IPO Date | February 7, 2024 to February 9, 2024 |
| Listing Date | [.] |
| Face Value | ₹10 per share |
| Price Band | ₹445 to ₹468 per share |
| Lot Size | 32 Shares |
| Total Issue Size | 11,176,713 shares (aggregating up to ₹523.07 Cr) |
| Fresh Issue | 9,615,384 shares (aggregating up to ₹450.00 Cr) |
| Offer for Sale | 1,561,329 shares of ₹10 (aggregating up to ₹73.07 Cr) |
| Issue Type | Book Built Issue IPO |
| Listing At | BSE, NSE |
| Share holding pre issue | 35,350,636 |
| Share holding post issue | 44,966,020 |
Capital Small Finance Bank Limited IPO Details
| Anchor Investors Allotment: | February 6, 2024 |
| IPO Open Date: | February 7, 2024 |
| IPO Close Date: | February 9, 2024 |
| Basis of Allotment: | February 12, 2024 |
| Refunds: | February 13, 2024 |
| Credit to Demat Account: | February 13, 2024 |
| IPO Listing Date: | February 14, 2024 |
So, how does CSFBL IPO Fare in Terms of Financials?
Financial Details
The financial highlights of IPO are summarised in this table below –
- They have notably substantial retail liability with a high share of CASA among SFBs.
- The bank offers a diversified portfolio to a dispersed customer base.
- The SFB deposit and credit are expected to reach 1% and 1.5%, respectively, from the current status of 0.6% and 1.0% by Fiscal 2024.
- They set themselves apart, focusing on growing the loan book with secured loans.
- Capital SFB has the lowest credit cost among its peers.
| Particulars | FY21 | FY20 | FY19 |
|---|---|---|---|
| Revenue From Operation | 3,185.85 | 2,768.19 | 2,317.57 |
| EBITDA | 702.29 | 499.19 | 386.90 |
| EBITDA Margin (%) | – | – | – |
| Profit | 1395.56 | 1091.49 | 925.70 |
| EPS | 11.98 | 8.16 | 6.82 |
| ROE | 9.51 | 7.72 | 8.02 |
FINANCIAL REVIEW
Positive Aspects:
- Revenue Growth: Revenue From Operation grew steadily across all three years, with a significant jump of 15.09% in FY21. This indicates healthy expansion and ability to capture market share.
- Profitability: Both profit and EPS saw consistent growth, with particularly impressive increases in FY21 (27.86% and 46.81% respectively). This suggests efficient operations and effective conversion of revenue to profit.
- Profit Margin: Though the data doesn’t show it directly, we can infer that profit margin likely improved given the simultaneous growth in revenue and profit. This indicates increasing efficiency and cost management.
Areas for Further Analysis:
- EBITDA Margin: While EBITDA grew significantly, a comparison with revenue growth is needed to assess whether the profit margin improved or declined.
- Return on Equity (ROE): Although still positive, ROE slightly decreased from FY20 to FY21. Deeper analysis is needed to understand the drivers of this decrease, such as increased equity capital or lower profitability relative to shareholder equity.
- Other Financial Metrics: Additional metrics like debt-to-equity ratio, current ratio, and loan delinquency rate are crucial for a comprehensive financial review.
- Industry Comparison: Benchmarking these figures against comparable SFBs will provide context and highlight CSFB’s relative performance.
Capital Small Finance Bank Limited IPO VALUATIONS
| Earning Per Share (EPS): | ₹27.35 per Equity Share |
| Price/Earning P/E Ratio: | N/A |
| Return on Net Worth (RoNW): | 15.33% |
| Net Asset Value (NAV): | ₹178.27 per Equity Share |
Capital Small Finance Bank Limited IPO – SWOT ANALYSIS
Strengths
- First Mover Advantage: As the first SFB IPO since 2018, Capital Small Finance Bank (CSFB) could attract investor interest due to its novelty and potential for growth.
- Strong Focus on Underserved: CSFB caters to the financially excluded, aligning with government initiatives and addressing a significant market gap.
- Proven Track Record: With a stable financial performance and good asset quality, CSFB demonstrates its viability and potential for future success.
- Attractive Valuation: Compared to some listed peers, the IPO price band appears competitive, potentially enticing value investors.
Weaknesses
- Limited Operating History: Compared to established banks, SFBs are relatively new with limited historical data, making future performance less predictable.
- Microfinance Dependence: CSFB’s heavy reliance on microfinance makes it vulnerable to economic downturns and rural sector issues.
- Intense Competition: The banking sector, especially in microfinance, is fiercely competitive, posing challenges for market share and profitability.
- Regulatory Uncertainty: Regulatory changes impacting SFBs could adversely affect CSFB’s operations and profitability.
Opportunities
- Growing SFB Market: The SFB sector is experiencing rapid growth, driven by government support and increasing financial inclusion needs.
- Digital Banking Expansion: Leveraging technology for wider reach and efficiency can enhance CSFB’s reach and profitability.
- Product Diversification: Expanding beyond microfinance to offer diversified financial products can mitigate risk and attract new customer segments.
- Strategic Partnerships: Collaborations with established players or fintech companies can accelerate growth and offer competitive advantages.
Threats
- Economic Downturn: A slowdown in the economy could negatively impact loan repayments and asset quality, affecting CSFB’s financial stability.
- Rising Interest Rates: Higher interest rates could increase borrowing costs for CSFB, impacting margins and profitability.
- Technological Disruption: New technologies and fintech players could disrupt the traditional banking landscape, posing challenges for established players like CSFB.
- Regulatory Scrutiny: Increased regulatory scrutiny on SFBs could lead to stricter compliance requirements and higher costs.
COMPETITIVE ANALYSIS: MARKET PEERS
Here are some of the key market peers of CSFBL IPO:
Capital Small Finance Bank (CSFB) is entering the IPO market with the potential to shake up the small finance bank (SFB) landscape. To understand its competitive position, let’s compare it to its key market peers:
Peer Group:
- Ujjivan Small Finance Bank (USFB): Established player with a larger branch network and wider product portfolio.
- Equitas Small Finance Bank (ESFB): Known for its strong technology adoption and focus on urban markets.
- Au Small Finance Bank (AUFB): Largest SFB in terms of assets, strong brand recognition, and diversified product offerings.
- Suryoday Small Finance Bank (SSFB): Smaller player with a focus on rural and semi-urban markets, similar to CSFB.
| Metric | CSFB | USFB | ESFB | AUFB | SSFB |
| Founded | 2009 | 2006 | 2007 | 2010 | 2010 |
| Branches | 1,000+ | 1,600+ | 867 | 3,300+ | 585 |
| Deposits (Cr) | 6,561 | 24,110 | 19,855 | 75,172 | 10,584 |
| Advances (Cr) | 5,507 | 20,938 | 20,513 | 58,547 | 8,902 |
| Net Profit (Cr) | 94 | 817 | 504 | 2,200 | 172 |
| P/E Ratio (TTM) | – | 26.06 | 37.42 | 38.21 | 29.36 |
| Focus | Rural & Semi-urban, Microfinance | Rural & Semi-urban, Diversified | Urban & Semi-urban, Technology | Diversified | Rural & Semi-urban |
Capital Small Finance Bank Limited IPO GMP
- Grey market premium as on 05-02-2024= Rs 40/Share
Disclaimer:
- IPO Grey Market Premium (CSFBL IPO GMP) mention is valid for the specific date as mentioned in the header.
- We are not buying and selling IPO forms on IPO Grey Market.
- Do not subscribe for IPO by just seeing premium Price as it may change anytime before listing. Subscribe only considering Fundamentals of the companies.
Capital Small Finance Bank Limited IPO
🔴 Live Subscription Status 🔴
09/02/2024 3:00 PM
| NO OF SHARES OFFERED | Day 1 | Day 2 | Day 3 | |
| Qualified Institutional Buyers(QIBs) | 23,10,528 | 0.29 | 1.06 | 6.64 |
| Qualified Institutional Buyers(QIBs) | 17,51,054 | 0.38 | 1.03 | 4.03 |
| Retail Individual Investors(RIIs) | 17,51,054 | 0.67 | 1.34 | 2.42 |
| Total | 81,47,373 | 0.50 | 1.19 | 3.96 |
FINAL TAKEAWAY
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