Capital Small Finance Bank – About the Company
Incorporated in 1999 and receiving the small finance banking(SFB) license in 2015,Capital Small Finance Bank is one of the leading small finance banks in India offering a wide range of banking products primarily including agriculture loans, MSME and trading loans (working capital, machinery loans etc.) and mortgages (housing loans and loans against property).
The bank operates on a branch-based model with a significant presence in semi-urban and rural areas. And as of Sep 30, 2023, it has a presence in five states and one union territory with173branches and 175 ATMs with76.30%of its branches located in rural and semi-urban areas covering 24districts and 75.75% of our total customers (both credit and deposit)depicting that it has well-defined niche catering to middle-income group segment with special emphasis on rural and semi-urban areas.
Apart from loans and advances it also generates fees (non-interest income) from forex, outward remittances, money transfer services, safe-deposit lockers, general insurance, life insurance product distribution, and 3-in-1 demat and trading accounts and other ancillary services.
The bank is the lowest interest-paying SFB where the rate of interest for retail term deposits inches up to only 7.60% whereas others offer a higher rate across some of the tenors in retail deposits. It offers a rate of 3.50% saving bank deposit irrespective of the amount of saving deposit as compared to other banks which have different saving bank deposit rates for various buckets.
Capital Small Finance Bank IPO Objectives
Out of the total issue size of Rs 523.07 crore, Rs 73.07 crore will be offer-for-sale (OFS) by the bank’s shareholders and Rs 450 crore will be fresh issues of equity shares. Hence, the bank will not receive any proceeds from the offer for sale, but the bank can utilize the net proceeds from the fresh issue.
As per the red herring prospectus, the bank proposes to utilize the Net Proceeds from the Fresh Issue towards augmenting our Bank's Tier–I capital base to meet the Bank’s future capital requirements. As the Bank continues to grow its loan portfolio and asset base, it expects to require additional capital in order to continue to meet applicable capital adequacy ratios with respect to its business.
Moreover, the bank also intends to grow the loan advances which would require Tier–I capital to comply with the applicable capital adequacy requirements. Moreover, the fund raised from the Fresh Issue will also be utilized to meet the expenses related wit this IPO. As per the RHP, one of the objectives of the bank is to receive the benefits of listing the equity shares on the Stock Exchange.
Capital Small Finance Bank IPO Details:
| IPO Open Date | 07-Feb-24 | |
| IPO Close Date | 09-Feb-24 | |
| Basis of Allotment | 12-Feb-24 | |
| Listing Date | 14-Feb-24 | |
| Face Value | Rs 10 per share | |
| Price | Rs 445 to Rs 468 per share | |
| Lot Size | 32 Shares | |
| Total Issue Size | [.] shares (aggregating up to Rs 523.07 crore) |
|
| Fresh Issue | [.] Shares, aggregating up to Rs 450.00 crore | |
| Offer For Sale | [.] Shares, aggregating up to Rs 73.07 crore | |
| Issue Type | Book Built Issue IPO | |
| Listing At | BSE & NSE | |
| QIB Shares Offered | Not less than 75% of the Net Issue | |
| Retail Shares Offered | Not more than 10% of the Net Issue | |
| NII (HNI) Shares Offered | Not more than 15% of the Net Issue |
Capital Small Finance Bank IPO Issue Price & Size
The issue price of Capital Small Finance Bank IPO is between the ranges of Rs 445 per share to Rs 468 per share. The total issue size of Capital Small Finance Bank IPO is Rs 523.07 crore, consisting of Rs 73.07 crore will be offer-for-sale (OFS)and the remaining Rs 450 crore will be fresh equity of shares.
Capital Small Finance Bank IPO Launch Date
Capital Small Finance Bank IPO will be launched on 07 Feb 2024 and the last date of the IPO will end on 09 Feb 2024. This means the investors can bid in the Capital Small Finance Bank IPO between 07 Feb 2024 to 09 Feb 2024, the basis of allotment is 12 Feb 2024 and the listing date is set on 14 Feb 2024.
Capital Small Finance Bank Financial Statements:
| Particulars (Rs in Million) | FY24 (6M) | FY23 (6M) | YoY | FY23 | FY22 | FY21 | CAGR |
| Interest Earned | 3859.8 | 3207.3 | 20.3% | 6760.1 | 5782.2 | 5114.4 | 15.0% |
| Interest Expended | 2150.1 | 1693.7 | 3540.2 | 3229.4 | 3128.3 | ||
| Net Interest Income | 1709.7 | 1513.6 | 13.0% | 3219.8 | 2552.8 | 1986.1 | 27.3% |
| Net Interest Margin (%) | 4.04% | 4.06% | 4.19% | 3.74% | 3.36% | ||
| Other Income | 292.3 | 220.8 | 494.8 | 541.9 | 458.3 | ||
| Operating Income | 2002.1 | 1734.4 | 15.4% | 3714.6 | 3094.7 | 2444.5 | 23.3% |
| Operating Expenses | 1248.2 | 1061.9 | 2227.5 | 1962.5 | 1729.6 | ||
| Operating Profit | 753.8 | 672.5 | 1487.0 | 1132.1 | 714.9 | 44.2% | |
| Provisions and contingencies | 209.9 | 261.6 | 551.1 | 506.5 | 307.0 | ||
| Net Profit | 543.9 | 410.9 | 32.4% | 936.0 | 625.7 | 407.8 | 51.5% |
| EPS Basic (Rs) | 15.59 | 12.02 | 27.35 | 18.41 | 12.04 | ||
| EPS Diluted (Rs) | 15.49 | 11.97 | 29.4% | 27.21 | 18.22 | 11.98 | 50.7% |
Source: RHP
| Key Ratios | FY21 | FY22 | FY23 | FY23 (6M) | FY24 (6M) |
| CASA Ratio | 40.08% | 42.16% | 41.88% | 41.56% | 37.76% |
| Gross NPA Ratio | 2.08% | 2.50% | 2.77% | 2.60% | 2.73% |
| Net NPA Ratio | 1.13% | 1.36% | 1.36% | 1.35% | 1.36% |
| Return on Equity | 9.51% | 12.95% | 16.62% | 15.33% | 16.45% |
| Return on Assets | 0.69% | 0.92% | 1.22% | 1.10% | 1.28% |
| Retail deposit (% of total deposits | 97.60% | 97.37% | 97.90% | 97.92% | 93.59% |
| Secured assets (% of loan book) | 99.39% | 99.70% | 99.82% | 99.76% | 99.85% |
| Cost to income ratio | 70.76% | 63.42% | 59.97% | 61.23% | 62.35% |
| CRAR% | 19.80% | 18.63% | 18.87% | 18.61% | 20.72% |
| Cost to Income Ratio (%) | 70.76% | 63.42% | 59.97% | 61.23% | 62.35% |
Source: RHP
Capital Small Finance Bank Financial Performance
In the first half ofFY24, the interest income of the Capital Small Finance Bank stood at Rs 385.98 crore which grew 20.3% from the same six months of FY23. The Net Interest Income of the bank in the first half of FY24 stood at Rs 170.97 crore which grew by 13% from the Sep ended half-yearly of FY23.
The Net profit of the bank for the first six months of FY24 was Rs 54.39 crore which surged32.4% from Rs 41.09 crore in the corresponding six months of FY23. The net interest margin of the bank in the first half of FY24 was at2.02% that has almost the same 2.03% in FY23.
The income from the interest of the Capital Small Finance Bank has grown at a CAGR of 15% from Rs 511.44 crore in FY21 to Rs 676.01 crore in FY23. While the Net Interest Income for the same period grew at a CAGR of 27.3% from Rs 198.61 crore in FY21 to Rs 321.98 crore in FY23.
On the other hand, the operating income of the Capital Small Finance Bank has grown at a CAGR of 23.3% from Rs 244.45 crore in FY21 to Rs 371.46 crore in FY23. The operating profit of the bank grew at a CAGR of 44.2% during the same period from Rs 71.49 crore in FY21 to Rs 148.7 crore in FY23.
Talking about the net income of the bank, the Net Profit of the Capital Small Finance Bank has remarkably grown at a CAGR of 51.5% during the same period. The net Interest Margin of the Capital Small Finance Bank was 4.90% in FY23, which has marginally come down from 5.68% in FY21.
Capital Small Finance Bank IPO Promoters & Shareholding of the Company
Sarvjit Singh Samra and Sarvjit Singh Samra are the major shareholders of the company having 11.77% and 9.44% stakes respectively in the bank as of the date of filling the red herring prospectus. While other major shareholders of the bank are Sarvjit Singh Samra, PI Ventures LLP, Amarjit Singh Samra, Amicus Capital Private Equity I LLP and many more, for their details check the table below.
| S.No. | Name of the Shareholder | Number of Equity Shares Held | % of the pre-Offer Equity Share capital on a fully diluted basis |
| 1 | Sarvjit Singh Samra | 41,74,619 | 11.77% |
| 2 | Oman India Joint Investment Fund II | 33,46,914 | 9.44% |
| 3 | Santokh Singh Chhokar | 17,60,000 | 4.96% |
| 4 | PI Ventures LLP | 16,86,980 | 4.76% |
| 5 | Amarjit Singh Samra | 16,40,864 | 4.63% |
| 6 | Amicus Capital Private Equity I LLP | 15,11,535 | 4.26% |
| 7 | HDFC Life Insurance Company Limited | 13,94,400 | 3.93% |
| 8 | Small Industries Development Bank of India | 13,49,650 | 3.81% |
| 9 | ICICI Prudential Life Insurance Company Limited | 13,22,400 | 3.73% |
| 10 | Max Life Insurance Company Limited | 10,57,700 | 2.98% |
| 11 | Surinder Kaur Samra | 9,36,486 | 2.64% |
| 12 | Navneet Kaur Samra | 8,84,800 | 2.50% |
| 13 | Rashpal Singh | 8,22,729 | 2.32% |
| 14 | Balbir Singh | 6,71,400 | 1.89% |
| 15 | Shahbaz Singh Samra | 4,75,513 | 1.34% |
| 16 | Gurinder Mann | 3,91,111 | 1.10% |
| 17 | Gursharan Bassi | 3,62,230 | 1.02% |
| 18 | Gurdev Singh Samra | 3,58,500 | 1.01% |
| 19 | Gurnam Singh | 3,58,435 | 1.01% |
| 20 | Total | 2,45,06,266 | 69.10% |
Source: RHP
Why Invest in Capital Small Finance Bank IPO?
In the last few decades the business of small finance banks (SFBs) in India has grown well with the encouraging schemes from the government and the demand for low-cost and easy-to-avail loans to meet their business requirements and short-term funding of low and middle-income groups of people and small entrepreneurs has encouraged the SFBs to enter into this business and grow along with them.
Also Read: What to Check Before Buying IPO: Things to Know & Is it Safe
If investing in any company, whether it is already listed or launched its IPO you have to analyse the various factors that can affect the growth and revenue or income of the company or such banks. As there is no historical share price data of the bank is not available hence, technical analysis is not possible, but you can use the fundamental analysis to analyse the fundamentals of the bank that will help you know its strengths and risk factors that can affect it's business and revenue. In respect of the same, we brought here the competitive strength and risk factors associated with the Capital Small Finance Bank.
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Competitive Strengths:
- Capital Small Finance Bank has created a retail-centric deposit franchise with a high share of CASA deposits with the CASA ratio increasing from 40.08% in FY21 to 41.88% in FY23. Its retail deposits have significant advantages including stability in deposits, greater customer retention, and enhanced cross-selling opportunities in addition to supporting the low cost of funds.
- The bank has consciously focused on building a secured and granular loan book over the years with a focus on income generation that enabled it to create a portfolio of cross products like agricultural, MSME and trading, mortgage lending and other products which helps it to mitigate risk and optimise its resources.
- The credit assessment processes and risk management practices enable it to maintain good asset quality and low failures. Its strategy of secured lending, primarily for productive purposes and conservative loan-to-value ratio contributes towards lower delinquencies and credit losses.
- The main focus of the bank is to provide products and services to cater to the middle-income group segment with special emphasis on rural and semi-urban area sin its areas of operations. It is operating as a one-stop financial hub for its customers where it operates.
- The bank has demonstrated consistent improvement in financial metrics such as total advance growth, deposit growth, increasing C/D Ratio, and improving cost-to-income ratio and profitability. The average credit to deposits ratio has also improved from 67.51% in Fiscal 2021 to 77.96% in Fiscal 2023 to 79.61%as of the six months ended September 30, 2023.
- The bank is led by a qualified and experienced Board and senior management team comprising professionals, who have extensive knowledge and understanding of the financial services industry and have witnessed various business cycles and interest rate cycles play out.
- Further, as a part of its growth strategy, intends to undertake geographical expansion by not only penetrating its existing markets deeper by opening new branches in the home state of Punjab but also entering newer territories to grow its credit and advances effectively.
- One of the key strengths of the bank is its granular retail-focused deposit base. It leveraged the strength of its brand to rapidly grow the deposit portfolio since it started operations as a small finance bank. Its retail focus helped it to maintain a high CASA as compared to its peers.
- The bank has invested in expanding its branch network which in turn helped to grow its loan book. It has opened 126branches since its conversion into an SFB taking the branch tally up to 173 branches. Its profitability is 212and operational metrics have been on the rise.
- At the financial end, it has also shown healthy growth in net interest income and net profit. Its Net Interest Income between FY21 to FY23 grew at a CAGR of 27.3%, while the operating income and net profit of the bank for the same period grew by 23.3% and 51.5% respectively.
- Capital Small Finance Bank is one of the best asset quality among the SFBs represented by GNPA and NNPA of 2.73% and 1.36%, respectively as of the first half of fiscal 2024 and the second lowest average GNPA at 2.52% and the fourth lowest average NNPA among the SFBs at 1.30% from Fiscals 2021 toH1 Fiscal 2024.
- Capital Small Finance Bank has the highest CASA ratio of 37.76% as of H1 fiscal 2024as compared with other SFBs and is comparable with leading private sector banks. If compared with larger private sector banks its CASA stood at 37.76% for Fiscal 2023.
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Risks Factors:
- Just like other banks Capital Small Finance Bank is required to ensure compliance with all regulatory norms formulated by the RBI. Unable to comply with such laws, regulations and norms may have an adverse effect on its business operations and the performance of the bank.
- The small finance banks (SFBs) segment in India has become one of the highly competitive industries with the 12 small finance banks (SFBs) operating in different parts of the country making it difficult for the Capital Small Finance Bank to expand its business in new regions.
- All SFB sare subject to inspections by the RBI. Inspection by RBI is a regular exercise for all banks and financial institutions and RBI has observed various non-compliances by it in the ordinary course in the past and has required it to, among other things, take corrective actions. Non-compliance with the observations issued by RBI could adversely affect the business operations and financial condition of the Capital Small Finance Bank.
- Capital Small Finance Bank is involved in certain legal proceedings, any adverse developments related to which could adversely affect the reputation, brand image and business of the bank.
- Any inability to undertake a fulsome due diligence or credit check may result in an increase in its NPAs and it has to increase the provisions correspondingly that may have a material adverse effect on its business, financial condition, results of operations and cash flows.
Capital Small Finance Bank IPO Grey Market Premium (GMP)
Grey Market Premium or GMP is that unofficial mechanism you can use to know the premium or discount price an investor is ready to pay in the grey market. Hence, GMP is determined in the grey market as per the demand-supply of the shares in the grey market.
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GMP is not a reliable factor as it keeps fluctuating as per the demand and supply in the grey market. A share price and stock market in India or in any country is affected by many factors. You should consider the intrinsic value or compare the valuation of the company with other listed peers. However, you can use the GMP, as a speculative price, at which the stock price might be listed on the stock exchange.
Also Read: What are the Top Factors Affecting the Stock Market in India
According to various reliable online sources, the GMP of Capital Small Finance Bank IPO is trading at around Rs 50 in the grey market shows the share of Capital Small Finance Bank is expected to list at around Rs 518 if you consider the upper price band of Rs 468 announced in the IPO for the bidding.
Capital Small Finance Bank IPO Review & Analysis
Taking the full-year financial results of Capital Small Finance, its earnings per share (EPS) was Rs 27.2 in FY23, and if considering the upper band issue price of Capital Small Finance IPO of Rs 468 per share and EPS of FY23 of Rs 27.2 per share the, the share Capital Small Finance is available atP/E of 17.2x.
However, the EPS as per the latest financial report by the bank for the last six months of FY24 stood at Rs 15.50 per share and if you consider the same EPS for the next half year of FY24, and annualized this EPS for the full year FY24E, it would be around Rs 31. Now considering this EPS and upper price band of Rashi Peripherals IPO of Rs 468 per share, the share price is available at P/E of 15x.
However, its nearest listed peers Ujjivan Small Finance Bank Limited and Esaf Small Finance Bank Limited both are trading at a P/E of 10x, showing the share price of Capital Small Finance is a little bit expensive. However, its other listed peers such as Au Small Finance Bank Ltd, Equitas Small Finance Bank Limited and Suryoday Small Finance Bank Limited, are trading at 34x, 24x and 24x respectively.
And if you compare the share price of Capital Small Finance with them, it is fairly priced. Henceforth, if you are looking to invest in a Capital Small Finance IPO, you can apply or subscribe for the Capital Small Finance IPO only with a medium to long-term investment perspective to get significant returns.
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How to Apply for Capital Small Finance Bank IPO?
Capital Small Finance Bank IPO you can use your existing trading account and demat account with your broker or you can apply to open the new one at Moneysukh. Here you will get the most advanced online trading platforms with the best demat account with the lowest brokerage charges in India to trade or invest in equity market, commodity market or forex market at lowest broking charges.
Also Read: Benefits of Minor Demat account: Empowering the next Generation of investors
Having a trading account and demat account for trading and investing you will get the advantages of the best online trading app with options to choose from various trading algorithms software such as Trade Radar,TradeTron, Keev, AlgoBulls, Quantman, and FoxTrader. You can also use the Algo-trading mechanism with the best algo-trading platform and trading strategies at Moneysukh with options to choose from the most popular & profitable algo-trading strategies or trade the best intraday algo-trading strategy at the lowest pricing. Right now, to apply for the Capital Small Finance Bank IPO follow the steps given below.
Steps to Apply for Capital Small Finance Bank IPO:
Step 1: To apply for Capital Small Finance Bank IPO you can use your PC or smartphone.
Step 2:Go to the browser and type trade.moneysukh.com and log in with your User ID & password.
Step 3:Now explore the IPO section and click on the Capital Small Finance Bank IPO.
Step 4:Here you have to fill in the required details like price, quantity, and so on.
Note: When you apply in the IPO bid at the cutoff price and then submit your application.
Step 5:Now make the desired payment and then submit your IPO application successfully.
Also Read: How to Convert Physical Shares Into Demat: Stepwise Procedure
How to Check Capital Small Finance Bank IPO Allotment Status?
The basis of the allotment date for Capital Small Finance Bank IPO is 12 Feb 2024, hence you can check the Capital Small Finance Bank IPO allotment status from this date onwards. If you don’t get the allotment of any share your money will be refunded into your bank account after 13 Feb 2024 or the fund will be unblocked if you have applied through the ASBA. However, to check the Capital Small Finance Bank IPO allotment status you can use various online sources including the Moneysukh.
Also Read: How to check IPO allotment status on NSE, BSE through Moneysukh
If the IPO is oversubscribed, then your chances of getting the allotment of shares are very low, especially if you have applied through the retail category or HNI category. Despite in oversubscription of the IPO if you manage to get the allotment of any share, then the allocated shares will be transferred into your demat account on 13 Feb 2024 or on the listing day i.e. 14 Feb 2024. However, if you follow tips and tricks while applying for IPOs you can increase your chances of getting the allotment.
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