Catholic Syrian Bank (CSB) may have dropped its plans to launch an initial public offering (IPO). The Kerala-based regional bank had filed draft red herring prospectus (DRHP) with market regulator SEBI in March this year for INR400 crore IPO. However, a report in the Business Standard newspaper states that bank promoters are in discussions with other banks to offload their stakes.
“HDFC Bank was approached for the deal and the talks are in a nascent stage,” said one of the sources the newspaper talked to, adding that “CSB had also approached a couple of other banks for the same deal.” RBL Bank (formerly Ratnakar Bank) and IDFC Bank are the other banks Catholic Syrian Bank is reported to have approached. The report adds that Ahmedabad-based Tejas Chokshi & Associates have been mandated to find potential buyers. All the three banks have denied that they are in negotiations with Catholic Syrian Bank for the transaction.
Catholic Syrian Bank is reportedly seeking a valuation in the range of INR1,100 – 1,500 crore. As of September 2014, its gross and net non-performing assets (NPAs) stood at 5.56% and 3.76% respectively. In its offer document filed with SEBI, the bank said its NPAs were following “increasing trend”. Apart from the industry-wide issue of NPAs, the bank is besotted with other issues. Early this year, its chief executive Rakesh Bhatia resigned and the bank is yet to find a replacement.
Perfect capital structure
According to RBI rules, promoters cannot hold more than 10% and an institution cannot hold more than 5% of a bank. Catholic Syrian Bank already fulfils these conditions as its top shareholder is Yusuff Ali M A who holds 4.98%. Collectively, the top 10 shareholders in the bank hold 37.71% of its pre-issue share capital. In its offer document, the bank has clearly indicated it has no promoters.
In light of the latest reports, it appears Catholic Syrian Bank may decide to delay bringing its IPO even after getting clearance from SEBI. An IPO go ahead from capital market regulator is valid for a period of one year.