Capital SFB IPO is a book-built number of ₹523.07 crores. The issue is a combination of fresh issue of 0.96 crore shares joined to ₹450.00 crore and an offer for sale (OFS) of 0.16 crore shares aggregating to ₹73.07 crore, through which promoters and outside investors will dilute five percent of their pre-issue holdings.
Read also: Capital Small Finance Banks ₹523 crore IPO opens: 10 key things to know
The minimum lot size per application is 32 shares and in multiples. The minimum amount of investment required from retail investors is ₹14,976. The bank has reserved not more than 50 percent of the issue for qualified institutional buyers, not less than 35 percent of the issue for retail investors, and not less than 15 percent for non-institutional investors (NII).
The promoters of the bank are Sarvjit Singh Samra, Amarjit Singh Samra, Navneet Kaur Samra, Surinder Kaur Samra, and Dinesh Gupta. Nuvama Wealth Management Limited, Dam Capital Advisors Ltd (Formerly IDFC Securities Ltd), and Equirus Capital Private Limited are the book-running lead managers of the Capital SFB IPO, while Link Intime India Private Ltd is the registrar for the issue.
The bank raised ₹157 crore from anchor investors a day before its IPO subscription opening for bidding. 33.53 lakh equity shares were allotted to 19 funds at ₹468 per which is also the upper end of the price range.
The allotment for the Capital SFB IPO is expected to be completed on Monday, February 12, 2024. Capital SFB IPO will list on BSE, and NSE with the tentative listing set as Wednesday, February 14, 2024.
The Jalandhar-based bank, which started operations in 2016 after converting itself from a local area bank, is 24 percent owned by the promoter family led by Sarvjit Singh Samra and his family. In 2015, Capital SFB became the first non-NBFC microfinance entity to receive the SFB license.
Read also: Capital Small Finance Bank IPO: Bank mobilizes ₹157 crore from anchor investors before issue
As of June 30, 2023, Capital Small Finance Bank had a presence in five states and one union territory, with a total of 172 branches and 174 ATMs. Capital Small Finance Bank Limited’s revenue increased by 14.72 percent year-on-year (YoY) and profit after tax (PAT) increased by 49.59 percent YoY in FY23.
Here are some of the main risks listed by the company in its Red-Herring Prospectus (RHP):
Capital Small Finance Bank IPO- 10 Key Risks
-The bank settled a matter with the capital market regulator Securities and Exchange Board of India (SEBI) in the past regarding the allotment of equity shares to more than 49 investors. In 2004-05, the bank made certain grants that were not considered in accordance with the then applicable laws relating to the issue and grant of securities.
-The bank has certain contingent liabilities, including guarantees given by it on behalf of our customers in India, which constituted 81.14 percent of the bank’s total contingent liabilities as of September 30, 2023. If these contingent liabilities materialize , the financial condition of the bank. , cash flows, and results of operations may be adversely affected.
The bank was subject to inspections by the Reserve Bank of India (RBI). RBI has observed various non-compliances by the bank in the ordinary course in the past and has required it, inter alia, to take corrective actions. Non-compliance with the observations issued by RBI could adversely affect its business, financial condition, results of operations and cash flows.
Read also: IPOs on February 7: 4 mainboard issues available for subscription, 1 SME to be listed
-The bank will not receive income from the OFS. It proposes to use the net income of the fresh issue to increase the capital base of level -I and meeting expenses. Each of the selling shareholders will be entitled to their respective share of the proceeds of the OFS in proportion to the shares tendered by the respective shareholders.
-The current Statutory Auditors of the bank, TR Chadha & Co., LLP, Chartered Accountants, have been found ineligible by the RBI to conduct the audit activities for the Financial Year 2024 of the bank. RBI, vide an email dated September 13, 2023, directed the bank to recommend the name of another company fulfilling the eligibility criteria.
-The bank derives a significant part of its income from the lending business and any adverse developments in the lending business could adversely affect its business, financial condition, cash flows and results of operations. Based on the industry in which the bank operates, a majority of its income is derived from interest earned, and discounts on advances/invoices.
-Some of the bank’s corporate records and files are not traceable. The bank cannot ensure that regulatory proceedings/actions will not be initiated against it in the future and that it will not be subjected to any penalty imposed by the competent regulatory authority in this regard. The bank is unable to trace the form files made to RoC including form 2, the shareholders’ resolution, and the proof of payment for allotments dated January 12, 2000 of 5,992,000 shares.
-The bank has experienced negative cash flows from operations in the recent past. In particular, the cash used in operating activities for treasuries ended 2023, 2022 and 2021, was negative mainly due to an increase in advances, an increase in investments and payment of direct taxes. Any negative cash flows from operations in the future could affect its results and financial condition.
-The bank has in the past made related transactions, which include borrowings payable to KMPs and their relatives, deposits held by KMPs/their relatives, and advances to KMPs/their relatives, and may continue to make such related transactions. in the future, which may involve conflicts of interest with the stockholders.
-In six months ended September 30, 2023, and fiscal ended March 31, 2023, the bank’s gross NPAs as a percentage of gross advances were 2.73 percent and 2.77 percent, and its current gearing ratio was 50.96 percent and 51.48 percent. cent respectively. If the bank is unable to control the level of NPAs or is unable to improve its provision coverage as a percentage of gross NPAs, the bank’s business, financial condition, and cash flows could be adversely affected.
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Published: 07 Feb 2024, 06:16 IST