Capital Small Finance Bank was established in the early 2000s. The company in 2015 gained the license of a small finance bank by the RBI. It was the first SFB in the country. The company has been engaged in business operations for the last two decades. It was the largest local area earlier before getting an SFB license in 2015. The company registered itself as an NBFC in the same year. The company’s business outlook is to build up a network of robust retail-focused banking franchises. The company focuses much more on the semi-urban and rural segment average earning individuals as their customer base. Capital Small Finance Bank has an excellent asset portfolio and strong underwriting skills, risk management structure, credit assessment collection.
Capital Small Finance Bank has 159 branches and 161 ATMs in Northern India. The company has exposure to a total of 19 districts in the area.
OBJECTS OF THE IPO ISSUE:
- Prepayment of all the company’s loans, which be availed on a consolidated basis.
- To meet corporate targets.
- To fund the working capital requirement.
BASIS OF THE OFFER:
- Capital Small Finance Bank has a Strong and a well – established franchise in the sector of retail liability and CASA.
- The bank has excellent Processes for assessment of the credit along with risk management.
- It also holds a customer-focused operational strategy with a profound understanding of its target audience.
- Capital Small Finance Bank has an established track record of financial and operational growth.
- The bank also has a team of Professionals, Management experts, and a support team that helps them achieve and maintain a highly efficient business operation.
CAPITAL SMALL FINANCE BANK IPO:
Capital Small Finance Bank Limited has its headquarters in Jalandhar. Recently the company has submitted its DRHP to the SEBI. The company is currently waiting for approval from SEBI to float its IPO in the market. The IPO of the company will be of Rs. Four hundred fifty crores of issue of fresh equity and an OFS of 3,840,087 equity shares have been brought forward by the promoters and the selling stakeholders.
The company also stated that it would carry out a pre-IPO placement offer of Rs. 90 crores. The selling stakeholders through the IPO are as follows:
| PI Ventures LLP | 3.37 lakh equity shares |
| Amicus Capital Pvt Equity I LLP | 6.04 lakh equity shares |
| Joint Investment Fund II | 70,178 equity shares |
| Gurdev Singh Samra | 3.58 lakh equity shares |
| Rashpal Singh | 2 lakh equity shares |
| Tarlochan Singh Hyare | 2.85 lakh equity shares |
| Avtar Singh Samra | 1.32 lakh equity shares |
| Gurnam Singh | 3.58 lakh equity shares |
| Ramesh Kaur | 1.67 lakh equity shares |
| Parminder Singh | 1.07 lakh equity shares |
The company also stated that the proceeds from the new equity issue would be used to augment its Tier-I capital base. It will be required to meet the future capital requirement of the bank.
| IPO Opening Date | February 2021 |
| IPO Closing Date | February 2021 |
| Issue Type | Book Building Type |
| Face Value | Rs. 10 / Equity shares |
| IPO Price | |
| Market Lot | |
| Min Order Quantity | |
| Listing At | BSE, NSE |
| Issue Size | |
| Fresh Issue | Rs. 450 Crores |
| Offer for Sale | 3,840,087 Equity Shares |
| Basis of Allotment Date | February 2021 |
| Initiation of Refunds | February 2021 |
| The Credit of Shares to Demat Account | February 2021 |
| IPO Listing Date | February 2021 |
| Basis of Allotment Type | % Of the Allotment through the IPO Offer |
| Qualified Institutional Buyer | 50 |
| Non – Institutional Investor | 15 |
| Retail | 35 |
WEAKNESS AND THREATS:
- The business operation of the company is mostly focused on North India. It is mainly concerned with Punjab, Rajasthan, Haryana & the major cities of Delhi and Chandigarh. The company operates a total of 156 branches in that region.
- Capital Small Finance Bank generates a large revenue from the Semi-Urban Areas and Rural Areas. The company has a very high dependency of around 91% through this business segment.
- Capital Small Finance Bank is engaged in the banking, financial business where it needs to comply with various rules, regulations and various statutory guidelines.
- The COVID-19 pandemic highly impacted the SFB industry. Capital Small Finance Bank was also the biggest player been impacted by the pandemic.
- The company is also susceptible to various operational and credit infusion risks. It can be a major reason for the high Gross NPA of the bank.
- Capital Small Finance Bank is also vulnerable to change in the Interest rate, which is a major consideration of the company’s Net Interest Margin. It has led to a decrease in the recorded financial parameters of the company.
- The company has been subject to trial under many legal procedures. Any negative news from there could lead to a detrimental impact on the company’s reputation.
- Presently, their firm relies heavily on banking operations in rural and semi-urban areas.
- Capital Small Finance Bank’s other major challenge is acquiring capital at competitive rates.
- The company is engaged in a business where it faces a lot of competition from many organized and unorganized players. Also, the growth of the SFB industry in the country is another competitive challenge for the company’s business operation.
- Capital Small Finance Bank is also vulnerable to failure of their database system, IT support system, cyber security attack and upgradation with the new technology system to remain in business.
STRENGTHS AND GROWTH PROSPECTS:
- The company has excellent operational fundamentals marked by its expertise in underwriting, credit evaluation, and risk management strategy. It has helped them to establish a high-quality asset portfolio.
- It also holds the greatest biggest retail deposits marked per branch and cheapest funding in the same category.
- Capital Small Finance Bank has a long track record with a history of very good operational and financial results.
- Their capitalization structure has improved significantly, with Capital Adequacy Ratio at 20.71% and Tier 1 Capital Adequacy Ratio at 14.57%. Many credit rating analyses of comfortable capital structure over medium-term outlook support the bank’s growth.
- Capital Small Finance Bank also has a highly diversified portfolio. It has the greatest share in secured lending, which stood at 99 percent in FY21.
- The company also stated that the company’s target until FY25 is to grow their ATM, Bank branches with a growth rate of 12%.
- The Capital Small Finance bank’s total business is Rs 8,588 crores. It has around 7.66 lakh CASA accounts. The bank also stated that it would improve its quality in the retention and opening of new CASA accounts shortly.
- Capital, Small Finance banks have registered to outperform financials with the least NPA, highest CASA, highest interest margins and overall CAGR growth in the SFB category.
- The bank has a solid financial profile. It registered a growth in the business revenue by 23.83% in FY20. The bank’s loan book also grew up by 27% in FY20. Their total deposits also registered a growth of 21.25% in FY20.
- The company also holds many well-positioned and market leaders firms as their investors. It has Amicus, HDFC Life and ICICI Prudential as their investors.
FINANCIAL TRENDS:
| Particulars | For the year/period ended ( in Cr.) | ||||
| 30-Jun-21 | 31-Mar-21 | 31-Mar-20 | 31-Mar-19 | ||
| Total Assets | 6,565.85 | 6,371.24 | 5,329.88 | 4,321.20 | |
| Total Revenue | 147.39 | 557.30 | 501.09 | 377.60 | |
| Profit After Tax | 12.18 | 40.78 | 25.38 | 19.41 |
| PARAMETERS | MARCH 21 | MARCH 20 | YoY % |
| Earnings Per Share (Rs) | 12.03 | 7.51 | 60.19 |
| Book NAV/Share (Rs) | 132.93 | 120.32 | 10.48 |
| Yield on Advances | 13.72 | 13.85 | -0.90 |
| Yield on Investments | 7.68 | 7.47 | 2.73 |
| Cost of Liabilities | 5.36 | 5.87 | -8.64 |
| NIM | 3.19 | 3.34 | -4.40 |
| Interest Spread | 8.36 | 7.98 | 4.78 |
| ROA (%) | 0.70 | 0.53 | 32.53 |
| ROE (%) | 9.51 | 7.73 | 23.12 |
| ROCE (%) | 9.31 | 9.23 | 0.95 |
| Cost Income Ratio | 70.75 | 75.77 | -6.62 |
| Core Cost Income Ratio | 73.27 | 77.83 | -5.86 |
| Operating Costs to Assets | 2.71 | 3.06 | -11.41 |
| EV/Net Sales(x) | 1.27 | 0.99 | 28.17 |
| EV/Core EBITDA(x) | 9.10 | 8.70 | 4.53 |
| EV/EBIT(x) | 1.77 | 1.42 | 24.94 |
| EV/CE(x) | 0.10 | 0.09 | 19.70 |
| Core Operating Income Growth | 15.05 | 27.74 | -45.72 |
| Operating Profit Growth | -3.25 | -36.21 | 91.02 |
| Net Profit Growth | 60.68 | 30.74 | 97.40 |
| BVPS Growth | 10.48 | 36.90 | -71.60 |
| Advances Growth | 12.65 | 27.29 | -53.64 |
| EPS Growth (%) | 60.19 | 10.14 | 493.50 |
| Loans/Deposits(x) | 0.12 | 0.09 | 24.78 |
| Cash / Deposits(x) | 0.14 | 0.05 | 177.84 |
| Investment / Deposits(x) | 0.23 | 0.24 | -1.85 |
| IncLoan / Deposits(x) | 11.81 | 9.47 | 24.78 |
| Credit/Deposits (%) | 71.38 | 74.40 | -4.06 |
| Net NPAs (funded) to Net Advances (%) | 1.13 | 1.25 | -9.60 |
PROMOTERS:
- Sarvjit Singh Samra
- Amarjit Singh Samra
- Navneet Kaur Samra
- Surinder Kaur Samra
- Dinesh Gupta
| Pre – Issue Share Holding | 23.33% |
| Post Issue Share Holding |
CONTACT DETAILS:
REGISTRAR:
Capital Small Finance Bank Limited
MIDAS Corporate Park, 3rd Floor,
37, G.T. Road, Jalandhar 144 001,
Punjab, India
Tel: +91 181 5051111
E-mail: cs@capitalbank.co.in
Website: www.capitalbank.co.in
Link Intime India Private Limited
C 101, 247 Park, L.B.S. Marg, Vikhroli (West),
Mumbai 400 083
Maharashtra, India
Tel: +91 22 4918 6200
E-mail: capitalsfb.ipo@linkintime.co.in
Website: www.linkintime.co.in
LEAD MANAGER(S):
- Edelweiss Financial Services Limited
- Axis Capital Limited
- SBI Capital Markets Limited
