Capital Small Finance Bank IPO to open on Feb 7, sets price band at ₹445-468/sh

• The Jalandhar-based SFB operates in Punjab, Haryana, Delhi, Rajasthan, HP and Chandigarh.
• The company has fixed a price band of ₹445-468 per equity share.
• It plans to use fresh issue proceeds to augment its Tier-I capital base.
  

The initial public offer of Capital Small Finance Bank will open on February 7 and close on February 9. The company has fixed a price band of ₹445-468 per equity share. Bids can be made for a minimum of 32 equity shares and in multiples of the same.

The IPO comprises a fresh issue of ₹450 crore, and an offer for sale of 15.6 million shares. The bank proposes to utilize the fresh issue proceeds to augment its Tier-I capital base, to meet its future capital requirements.

“As the bank continues to grow its loan portfolio and asset base, the bank expects to require additional capital in order to continue to meet applicable capital adequacy ratios with respect to its business,” it said in a press release.

Two decades of banking experience

The Jalandhar based small finance bank was incorporated in 1999. With a range of banking products on the asset and liability side, it operates Punjab, Haryana, Delhi, Rajasthan, Himachal Pradesh and Union Territory of Chandigarh.

“Our asset products primarily include agriculture loans, MSME and trading loans and mortgages. We focus primarily on the middle-income customer segments,” it said in its DRHP.

As of September 30, 2023, its gross advances stood at ₹5,865 crore, while total deposits were at ₹7,000 crore. Its gross non-performing assets (NPAs) stood at 1.36%, while its net interest margin was at 4.04%.

Particulars	FY23	FY22	FY21
Income	₹725 crore	₹632 crore	₹557 crore
Net profit	₹93.5 crore	₹62.5 crore	₹40.7 crore

Source: DRHP

Risk factors: Competition & more

Apart from being under RBI’s scrutiny, the bank also said it has had negative cash flows in the past. It also lists intensive competition in the sector as a risk factor. Some of its competitors may have better brand recognition, business experience, diversified operations, and access to lower costs of funding.

“We face our most significant organized competition from other SFBs, NBFCs and cooperative banks which have significant presence in rural and semi-urban areas, public sector banks, private sector banks, housing finance companies and other financial services companies in India,” it said.

It has also settled a matter with markets regulator SEBI in the past, in connection with allotment of equity shares. During FY05, it had made a total of 14 allotments in multiple tranches with each tranche of not more than 49 allottees to an aggregate of 402 allottees.

“These allotments, on a consolidated basis, were considered not in compliance with the then applicable laws relating to issuance and allotment of securities,” the bank said.

Its current statutory auditors, M/s T R Chadha & Co., LLP, Chartered Accountants, have been found ineligible by RBI for undertaking the audit activities for FY24 of the bank.

The bank has taken up 207 criminal proceedings along with six material civil litigations, and the aggregate amount involved is ₹63.3 crore. The bank also has one tax proceeding and a material civil litigation against it.