The financial sector in India has seen a flurry of Initial Public Offerings (IPOs) recently, with Capital Small Finance Bank being the latest entrant. Having filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Bank of India (SEBI), the bank is poised to raise ₹450 crore through a fresh issue and an additional 2.4 million shares via an Offer for Sale (OFS). This blog aims to provide an in-depth analysis of the upcoming IPO, focusing on key areas like the bank's financial performance and valuation metrics.
B) What is Capital Small Finance Bank?
Capital Small Finance Bank commenced its operations in 2016 and has since focused on secured lending. As a small finance bank, it plays a critical role in driving financial inclusion in India, offering banking services to underserved sections of the society. The Bank pioneered in bringing modern banking facilities to the rural areas at a low cost. From day one 7-Day Branch Banking was introduced with extended banking hours. The focus to serve the common man and the local touch advantages has given the Bank a competitive edge over other banks operating in the region. Within a short period, most of the Branches become market leaders of their respective centers. The Bank is providing a safe, efficient, and service-oriented repository of savings to the local community while reducing their dependence on moneylenders by making need-based credit easily available.
C) IPO Details
1. Fresh Issue
The fresh issue of equity shares aims to raise ₹450 crore primarily to boost the bank's Tier-I capital base, thereby strengthening its financial stability. 2. Offer for Sale (OFS)
The OFS includes shares from multiple investors such as Oman India Joint Investment Fund II, PI Ventures, and Amicus Capital, among others.
D) Financial Performance
1. Gross Advances
: ₹5,507 crore 2. Deposits
: ₹6,561 crore 3. Revenue
: ₹725 crore 4. Profit After Tax (PAT)
: ₹94 crore 5. Book Value
The bank has showcased impressive growth in its financial metrics, with a considerable rise in gross advances and net profit, indicating robust operational efficiency.
Currently, the price of the unlisted shares stands at ₹450.
To calculate the Price-to-Book (P/B) ratio:
P/B Ratio=450/178 = 2.53x