Capital Small Finance Bank is planning an IPO scheduled to open on February 7, 2024. As the name suggests, it is a Small Finance Bank (SFB) of India. It has generated strong revenue and profit growth over the past several years.Summary of this article Capital Small Finance Bank IPO Detailsprovides a complete review of IPOs, providing dates, size, objectives, investment reasons, risk factors, and helps investors decide whether to invest or avoid.
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Capital Small Finance Bank IPO details and dates
IPO start date | February 7, 24 |
IPO deadline | February 9, 24 |
IPO listing date | February 14, 2024 |
Type of problem | Book Built Issue IPO |
face value | 10 rupees per share |
IPO price range | 445 to 468 rupees per share |
lot size | 32 stocks |
Exhibition location | BSE and NSE |
Total issue size | Rs. 523.07 billion |
Latest issue | Rs. 450 million |
OFS | Rs. 730.7 billion yen |
About Capital Small Finance Bank Limited
Capital Small Finance Bank is one of them. 12 small finance banks in India regulated by RBI.
Capital SFB started operations as the first small finance bank since 2016 with RBI approval. We offer a wide range of banking products in states like Punjab, Haryana, Delhi, Rajasthan, Himachal Pradesh and Chandigarh. The bank’s services include agricultural loans, MSME and trade loans, and home loans. He has over 20 years of experience in the banking industry, with a particular focus on middle-income groups in rural and semi-urban areas.
The bank’s core strategy involves providing access to affordable credit to customers who have limited access to formal banking channels. Since transforming into a small finance bank, the company has expanded its operations into new areas, resulting in an increase in its customer base and improved operational indicators.
With 173 branches and 175 ATMs, the bank primarily serves rural and semi-urban areas, covering 24 districts and 75.75% of its total customers. The company aims to continue expanding its business and is focusing on secured loans with an average gross NPA ratio of 2.52% and negligible write-offs.
The bank has consistently shown growth in profit after tax, RoA and RoE, with a focus on retail and CASA deposits. The company generates fee income from a variety of products and services and aims to be its customers’ primary banker through a combination of product offerings, customer service, brick-and-mortar and digital channels.
A large portion of the loan book is secured, with loans primarily secured by real estate. The bank has significantly increased loans with ticket sizes up to Rs 2.5 million and is strategically focused on building a granular loan book. Additionally, we boast the lowest interest rates and deposit costs compared to other similar small finance banks.
Capital Small Finance Bank IPO Price Valuation
- IPO price range is Rs 445 to Rs 468 per share
- Considering the weighted EPS of Rs 21.68 over the last three years, the P/E ratio is 22x.
- Considering last year’s FY2023 EPS was Rs 27.21, the P/E ratio is 17 times.
- Annualized EPS for the six months ending September 2023 yields a P/E ratio of 15x.
- Listed peer banks such as AU Small Finance Bank have a P/E ratio of 29x (highest), while Ujjivan Small Finance Bank Limited has a P/E ratio of 9.5x (lowest), while the industry average P/E ratio is 19.3x. Therefore, the IPO price range of 15x to 22x P/E is fully priced..
Capital Small Finance Bank IPO Target
The IPO size is Rs 523.07 crore and includes both OFS and fresh issue.
- OFS 7,307 billion rupees – In the case of a sale, the proceeds are paid to the selling shareholders and the company does not receive any profits.
- New issue of Rs 450 million – The fresh issuance will be used to augment the bank’s Tier-1 capital base to meet the bank’s future capital requirements.
Capital Small Finance Bank Ltd Finance
Period ends | March 31, 2021 | March 31, 22 | March 31, 23 | September 30, 23 |
---|---|---|---|---|
assets | 6,371.24 | 7,153.92 | 7,990.77 | 8,390.69 |
revenue | 557.27 | 632.40 | 725.48 | 415.22 |
Profit after tax | 40.78 | 62.57 | 93.60 | 54.39 |
net worth | 450.79 | 515.78 | 610.61 | 711.76 |
reserves and surplus | 416.88 | 481.74 | 576.36 | 676.41 |
Total loan amount | 616.72 | 498.43 | 721.38 | 572.76 |
Why invest in Capital Small Finance Bank’s IPO?
Here’s why you should consider investing in this bank’s IPO.
- Deposit franchise specializing in retail: The bank has built a strong retail deposit base, the majority of which consists of CASA (current account) deposits. This stability of deposits provides a solid foundation for bank operations and demonstrates customer confidence.
- Safe and diverse loan portfolio: The Bank has consciously built a secure and diversified lending facility over the years, with a focus on income generation. The majority of loans are secured by real estate, minimizing risk. The bank offers a variety of loan products to meet the needs of its customers.
- Streamlined credit assessment and risk management: The bank follows rigorous credit evaluation processes and risk management practices, which result in good asset quality and low delinquency rates. Our focus on secured financing and conservative loan-to-value ratios helps us maintain high asset quality.
- Customer-centric approach: With over 20 years of experience, we have a deep understanding of our market and customer base. We offer a wide range of products and services to meet the financial needs of our customers, especially those in rural and semi-urban areas. The bank focuses on building long-term relationships with its customers.
- Consistent growth track record: The Bank has demonstrated consistent improvement in financial indicators such as gross advances growth, deposit growth and profitability. Its efficient operations and expansion into new regions demonstrate growth potential and operational efficiency.
- Financial stability and liquidity: The bank maintains a healthy liquidity ratio and a stable financial position. This is critical for long-term sustainability and growth. Our ability to meet regulatory requirements and maintain strong liquidity coverage ratios enhances our financial stability.
Risk factors in Capital Small Finance Bank’s IPO
The risk factors associated with investing in IPOs of the banks mentioned above are:
- OFS : IPO goals include both OFS and fresh issuance. The OFS portion is paid to the selling shareholder and the company receives no profit.
- Violation of regulatory requirements: The bank had previously entered into settlements with SEBI for violation of applicable laws related to allotment of shares. Failure to comply with regulatory requirements can lead to penalties, restrictions on banking operations, increased monitoring, and revocation of banking licenses.
- Regulatory oversight and inspection: The bank has been inspected by the Reserve Bank of India (RBI) and has been directed to address various non-compliances including NPA identity verification, credit monitoring mechanism and identity verification procedures. Violation of RBI directives may result in penalties and restrictions that may adversely affect a bank’s operations and financial performance.
- Contingent liability: The Bank has significant contingent liabilities, including guarantees provided on behalf of its customers, which could adversely affect its financial condition if these obligations materialize or if the customers default on their obligations. There is a gender.
- Competition in the banking sector: The small finance banking industry in India is highly competitive and the Bank faces competition from other small finance banks, NBFCs, cooperative banks, public private banks and financial services companies. If we are unable to compete effectively, the Bank’s business, financial condition and results of operations may be affected.
- Income dependence on loan business: The bank derives a significant portion of its revenue from lending operations. Any adverse impact on our lending business, such as an increase in defaults or a downturn in the economy, could adversely affect a bank’s financial condition, cash flows and results of operations.
- Ineligibility of auditors: The bank’s current statutory auditor has been found ineligible by the RBI to perform audit activities for the financial year 2024. Failure to appoint another qualified firm within the prescribed period could delay the completion of the audited financial statements and create uncertainty in the audit procedure.
Investors should carefully consider all risk factors set out below. Capital SFB IPO RHP Perform thorough due diligence before investing in a bank’s IPO.
Capital Small Finance Bank IPO FAQ
Is Capital Small Finance Bank safe?
All small finance banks including Capital SFB are regulated by RBI. If you want to invest in fixed deposits, like other banks, this small finance bank also offers deposit insurance up to Rs 5 lacs.
Also read: Jana Small Finance Bank IPO Review
What is the current IPO GMP of Capital Small Finance Bank?
A gray market premium is a premium that trades above the stock price in the offline market. Although sometimes inaccurate and difficult to verify, some popular websites list his GMP as:
- Chittorgarh hints that capital SFB has fallen from Rs 50 to Rs 43 in the past few days
- 5-Paisa also shows that Capital SFB’s GMP has fallen from Rs 50 to Rs 47 in the last three days.
- IPOWatch has been tracking this closely and shows that Capital Small Finance Bank’s gray market premium is currently at Rs 50.
- IndiaToday tracks Capital Small Finance Bank’s GMP at Rs 37 currently.
Can I read Capital Small Finance Bank IPO review in Hindi?
yes.You can read it at Capital Small Finance Bank IPO Review in Hindi.
Capital Small Finance Bank IPO Review – To Apply or Not?
Now, you may be wondering whether this IPO is good or bad for your investment. Investors should weigh all the pros and cons before coming to a conclusion on this.
- IPOs offer investors the opportunity to leverage banks with an established presence in the market, providing access to profitable sectors. The bank has built a strong consumer deposit base to secure and diversify its loan portfolio. It has generated strong revenue and profit growth in the past.
- However, the IPO comes with risks, primarily due to the bank’s history of regulatory violations and ongoing regulatory oversight. Persistent challenges from regulators can lead to penalties, operational restrictions, and even license revocation, with significant implications for a bank’s operations and investor confidence. In addition, the Bank’s significant contingent liabilities, particularly those related to guarantees, pose financial risks that may affect its resources and profitability in the future.
High-risk investors who can tolerate all the risk factors indicated in RHP can invest in such IPOs.
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