Catholic Syrian Bank plans QIP to raise up to Rs400 crore

Mumbai: Kerala based-Catholic Syrian Bank (CSB) Ltd is looking to raise as much as Rs400 crore by selling shares to financial institutions, following the collapse of its plan to sell a major stake to Prem Watsa owned Fairfax Financial Holdings Ltd over differences in valuation.

The bank plans to raise money through a qualified institutional placement (QIP), where listed companies sell shares, fully and partly convertible debentures, or any security other than convertible warrants, to a qualified institutional buyer.

“The board has given the approval to raise up to Rs400 crore through a QIP before end October. We have appointed JM Financial as the merchant banker,” said C.V.R. Rajendran, managing director and chief executive of Catholic Syrian Bank.

Mint reported on 25 July that the private sector lender was considering various fund-raising options including a QIP to raise short-term capital. It was even reconsidering a share sale, three years after it had filed a draft red herring prospectus.

Before the board approved the QIP, CSB was looking to sell 51% stake to Fairfax but the deal did not go through since the bank felt the offer was too low. According to another person familiar with the development who spoke under condition of anonymity, Vallabh Bhansali, chairman of Enam group on 23 May picked up a nearly 4% stake in the bank at a valuation of Rs160 per share, a 30% premium to CSB’s Rs123.5 per share book value at the end of March. This also values the bank at around Rs1,295 crore.

“We would like to see three years of profitability before we go for an IPO. Meanwhile, we believe that fund-raising through QIP will help us meet the bank’s capital requirement for the next two years,” Rajendran added. At the end of March, Catholic Syrian Bank had a capital adequacy ratio of 12.15%, higher than the 10.25% mandated by Basel-III norms. But it needs to beef up its capital position to grow its loan book faster than the 3.4% rate in 2016-17. The bank had reported two years of losses before showing a profit of Rs1.5 crore in 2016-17.

Catholic Syrian Bank’s QIP plans comes at a time when fund raising through this route has touched a record this year. Mint reported on 6 September that 18 companies raised Rs34,881.5 crore through QIPs so far this year. After this, Bajaj Finance raised nearly Rs4,500 crore through a QIP in early September, raising total QIPs to Rs38,681 crore, and beating the 2009 record of 54 companies raising Rs34,675.75 crore through this route.

Banking and financial services sector has seen the biggest QIPs, led by State Bank of India (SBI) and Kotak Mahindra Bank. Other banks that have tapped the QIP route this year include Yes Bank, Federal Bank, DCB Bank and United Bank of India, which have collectively raised close to Rs8,000 crore.