Capital Small Finance Bank IPO opens today: Should you subscribe? Check GMP and other details

Capital Small Finance Bank IPO: The ₹523. 07 crore initial public offering (IPO) of Capital Small Finance Bank (SFB) opened for subscription today, February 7, and will close on February 9. The company has fixed the IPO price band in the range of ₹445-468.

Ahead of the bidding, the Capital Small Finance Bank raised ₹57 crore from anchor investors. Whiteoak Capital, Nippon Life India, Edelweiss Tokio Life Insurance, Ashoka India Equity Investment Trust, 360 ONE Mutual Fund, HDFC Life Insurance Company, Ananta Capital Ventures Fund, ICICI Prudential Life Insurance Company, SBI General Insurance Company, Kotak Mahindra Life Insurance Company participated in the company's anchor book.

Capital Small Finance Bank IPO Subscription Status

Capital Small Finance Bank IPO has been subscribed 21 percent till 1:00 pm on the first day of bidding. It received bids for 16.34 lakh equity shares as compared to 78.23 lakh shares on the offer.

The public issue was subscribed 0.37 times in the retail category and 0.11 times in the Non-Institutional Investors’ (NII) category so far. The Qualified Institutional Buyers (QIB) are yet to bid for the IPO.

Capital Small Finance Bank GMP today

The company's shares in the grey market continued trading at a premium of ₹43. This indicates an estimated listing price of ₹511, up 9.19 percent from the IPO price of ₹468. The GMP was the same as in the previous session (February 6). However, it declined from ₹47 on February 5 and ₹50 on February 4.

Read here: Capital Small Finance Bank IPO: ₹157 crore raised from anchor investors

However, one must note that grey market premium is only an indicator of how the company's shares are performing in the unlisted market and can change quickly.

Capital Small Finance Bank IPO: Should you buy?

Anand Rathi: Subscribe for long term

Capital Small Finance Bank is retail focused liability franchise with a high share of CASA. It has a secured and diversified advanced portfolio. Their credit assessment processes and risk management practices enable them to maintain good asset quality and low delinquencies. They have gained an understanding of their market and customer base over the years, enabling them to meet the financial requirements of their existing and potential customers.

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At the upper price band, the company is valuing at a P/B of 2.01x, with a market cap of ₹21,080 million post issue of equity shares and a return on net worth of 15.33 percent. The brokerage believes that the valuation of the company is fairly priced and recommends a “Subscribe-Long Term” rating to the IPO.

SMC Global: Subscribe

Capital Small Finance Bank stands out as the pioneer non-NBFC microfinance entity to land the coveted SFB license in 2015. Currently rooted in the North, this ambitious player eyes nationwide expansion through an extensive branch network in the coming years. The bank believes it is well positioned to take advantage of the tailwinds and intends to continue to grow its portfolio with a focus on secured lending which it believes will provide it a competitive edge over its competitors. Boasting consistent top and bottom line growth, the issue seems attractively priced. Savvy investors seeking long-term gains might consider this a promising opportunity.

Sushil Finance: Subscribe for long-term

The company has a strong presence in semi-urban and rural areas with a branch-based operating model. The company intends to continue to grow the loan book organically with a focus on secured lending. They also intend to leverage technology and data analytics for scalability and profitable growth. The small finance business in India is becoming a highly competitive area. The company has generated negative cashflows in the past. However, with strong penetration of banking and micro-finance services expected in the rural and semi-urban areas, the company stands to gain. The total income grew at a CAGR of 14.1% over FY21– FY23. The net profit margin as of FY23 stood at 13.85% and as of HYFY24 – 14.1%. The gross NPA and net NPA stood at 2.77% and 1.36% respectively as of FY23. The company generated ROE and ROA of 16.62% and 1.22% as of FY23 and the number was 16.45% and 1.28% as of HYFY24. Keeping all these factors in mind, cash rich investors may apply for the IPO with long-term visibility.

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Marwadi Financial Services: Subscribe

Considering the Sep- 23 BVPS of ₹257.92 on a post-issue basis, the company is going to list at a P/B of 1.81x with a market cap of Rs. 21,080 mn whereas its peers namely IDFC First Bank, AU SFB, Equitas SFB, Suryoday SFB, Ujjivan SFB are trading at a P/B of 2.11x, 3.82x, 2.25x, 1.09x, 2.72x. We assign “Subscribe” rating to this IPO as the company has a consistent track record of growth with constantly improving operational and profitability metrics. Also, it is available at a reasonable valuation as compared to its peers.

Dilip Davda: May subscribe

This small finance bank is currently a north region-centric financial service provider and mulls pan India's presence in coming years with the expansion of its branch network. For the reported periods, it posted steady growth in the top and bottom lines. Based on FY24 annualised earnings, it appears aggressively priced issue. Well-informed investors may park funds for the long-term rewards.

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Capital Small Finance Bank IPO details

The issue is a combination of a fresh issue of 96 lakh shares aggregating to ₹450.00 crore and an offer for sale of 16 crore shares aggregating to ₹73.07 crore. The minimum lot size for an application is 32 shares and in multiples thereof. The minimum amount of investment required by retail investors is ₹14,976.

The bank proposes to utilise the net proceeds from the fresh issue towards augmenting the Tier-I capital base to meet future capital requirements. Further, the proceeds from the fresh issue will also be used towards meeting the expenses in relation to the offer.

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.

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The allotment for the Capital SFB IPO is expected to be finalised on Monday, February 12, 2024. Capital SFB IPO will list on BSE, NSE with the tentative listing date fixed as Wednesday, February 14, 2024.

About Capital Small Finance Bank

In 2015, Capital SFB became the first non-NBFC microfinance entity to receive the SFB license. The company has a strong presence in semi-urban and rural areas with a branch-based operating model. Capital Small Finance Bank is headquartered in Jalandhar, Punjab, and has strategically expanded its SFB operations in northern states of India such as Punjab, Haryana, Rajasthan, Delhi, Himachal Pradesh and UT Chandigarh. 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.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.