Fairfax India gets 15 years to lower stake in CSB Bank to 15%

Lender plans to go public by Sept.

Prem Watsa’s Fairfax India Holdings Corporation, which has 51% stake in CSB Bank (erstwhile Catholic Syrian Bank), will get 15 years to reduce its stake to 15%, sources said.

According to a road map prepared by the old generation private sector lender submitted to the Reserve Bank of India (RBI), Fairfax will have to cut its stake to 40% in the next five years, to 30% in the subsequent five, and to 15% by the end of 15 years.

The latest RBI norms on private sector banks mandate that promoters should cut stake to 15%.

In February, the Thrissur-based lender had announced that Fairfax would pick up 51% stake at a price of ₹140 per share.

The lender, which has started the process to position itself as a new generation bank, recently filed the draft red herring prospectus with the Securities and Exchange Board of India for an initial public offering.

The Reserve Bank of India had mandated that the lender list its share on the exchanges by September this year. “The net proceeds from the fresh issue are proposed to be utilised to augment the bank’s Tier-I capital base to meet future capital requirements that are expected to arise out of growth in our bank’s assets — primarily our bank’s loans/advances and investment portfolio — and to ensure compliance with Basel III and other RBI guidelines,” the bank said.

Axis Capital Limited and IIFL Securities Limited are the Book Running Lead Managers (BRLMs) to the issue.

According to the bank’s annual report, its capital adequacy ratio significantly improved from 9.9% as at end March 2018, to 16.7% as at end March 2019, following a ₹720-crore investment by Fairfax.

The bank expects remaining funds towards share capital and warrants of ₹487 crore from Fairfax India this financial year to further boost the capital base.

The bank had reported a net loss of ₹197.42 crore in FY19 as against net loss of ₹97.47 crore in FY18.

While gross NPA reduced from 7.9% to 4.9%, net NPA reduced from 4.5% to 2.3% during the previous financial year. Provisioning Coverage Ratio improved from 62% to 78%. CSB Bank has a strong base in Kerala and significant presence in Tamil Nadu, Karnataka and Maharashtra, with a customer base of 1.3 million as on March 31, 2019.

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