Capital Small Finance Bank IPO - Investment Rationale, Issue Details, Peer Comparison, Risks: Anand Rathi

Anand Rathi's IPO Report

Capital Small Finance Bank Ltd. will launch its initial public offering Feb. 07 and the company has fixed a price band in the range of Rs 445-468 apiece. The minimum order lot is 32.

The Rs 523-crore IPO consists of Rs 450 crore of fresh issue and the remaining Rs 73 crore via offer for sale.

Object of the issue

Offer for sale:

• The bank proposes to utilise the net proceeds from the fresh issue towards augmenting their tier-I capital base to meet their future capital requirements.

• The proceeds from the fresh issue will also be used towards meeting the expenses in relation to the offer.

• General corporate purposes.

Key strategies:

• The company aims to continue growing their loan book organically with a focus on secured lending.

• The company aims to strengthen its liability franchise.

• Leverage technology and data analytics for scalability and profitable growth.

Peer benchmarking

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 of the same, its retail franchise and reach had already been established across the current and savings deposits as well as retail term deposits placing it in good stead as against other small finance banks.

For Capital SFB, the base is already present and further improvements on top of the same is helping it grow faster.

About the Company

Capital Small Finance Bank is retail focused liability franchise with a high share of current account and saving account. It has a secured and diversified advances portfolio. Their credit assessment processes, and risk management practices enable them to maintain good asset quality and low delinquencies.

They have gained an understanding of their market and customer base over the years, enabling them to meet the financial requirements of their existing and potential customers.

We believe that valuations of the company is fairly priced and recommend a 'Subscribe-Long Term' rating to the IPO.

Key risk:

• Bank has settled a matter with SEBI in the past in connection with allotment of Equity Shares to more than 49 investors.

• The company is required to ensure compliance with various regulatory requirements. If the company is unable to comply with such laws, regulations, and norms, it may have an adverse effect on their business, financial condition, results of operations, and cash flow.

• There have been certain primary and secondary transactions involving their Equity Shares in the last three Financial Years.

• The Indian small finance bank industry is intensely competitive and if they are unable to compete effectively it would adversely affect their business, financial condition, results of operations and cash flows.

• The company derives a significant portion of its revenue from its lending business, and any adverse developments in the lending business could adversely affect their business, financial condition, cash flows, and results of operations.

Click on the attachment to read the full IPO report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.