Capital Small Finance Bank IPO Opens Today: Is it Worth Subscribing?

Ahead of its launch, Capital Small Finance Bank secured ₹57 crore from anchor investors, including 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, and Kotak Mahindra Life Insurance Company.

As per grey market trends, the company’s shares are trading at a premium of ₹43, indicating an estimated listing price of ₹511, up by 9.19% from the IPO price of ₹465. Although the grey market premium remained steady from the previous session, it saw a decline from ₹47 on February 5 and ₹50 on February 4. However, it’s essential to note that grey market premiums are volatile and can change rapidly.

Regarding the IPO’s prospects, various brokerage firms have shared their recommendations:

Anand Rathi advises subscribing for the long term, citing Capital Small Finance Bank’s retail-focused liability franchise and secure and diversified loan portfolio. The company’s valuation at a P/B of 2.01x and a return on net worth of 15.33% is considered fair, warranting a “Subscribe-Long Term” rating.

SMC Global recommends subscribing, highlighting the bank’s status as the first non-NBFC microfinance entity to obtain the SFB license and its plans for nationwide expansion. With consistent growth and an attractive issue price, long-term investors might find it promising.

Sushil Finance suggests subscribing for the long term, emphasizing the bank’s strong presence in semi-urban and rural areas and its strategy of focusing on secured lending. Despite past negative cash flows, the potential for growth in India’s small finance sector makes it a compelling option for investors seeking long-term gains.

Marwadi Financial Services assigns a “Subscribe” rating, considering the company’s consistent growth track record and reasonable valuation compared to its peers.

Dilip Davda leans towards a cautious “May Subscribe” stance, acknowledging the bank’s plans for nationwide expansion but cautioning against the aggressive pricing based on FY24 earnings.

Capital Small Finance Bank IPO Details:

The IPO comprises a fresh issue of 96 lakh shares worth ₹450.00 crore and an offer for sale of 16 crore shares worth ₹73.07 crore. The minimum lot size is 32 shares, with an investment requirement of ₹14,976 for retail investors. The proceeds will primarily bolster the bank’s Tier-I capital base and cover offer-related expenses.

Book-running lead managers for the IPO are Nuvama Wealth Management Limited, Dam Capital Advisors Ltd (formerly IDFC Securities Ltd), and Equirus Capital Private Limited, with Link Intime India Private Ltd serving as the registrar.

The allotment is expected on Monday, February 12, 2024, with a tentative listing date set for Wednesday, February 14, 2024.

About Capital Small Finance Bank:

Established in 2015, Capital SFB was the first non-NBFC microfinance entity to receive an SFB license. It operates predominantly in semi-urban and rural areas and has expanded strategically across northern India. As of June 30, 2023, the bank had a presence in five states and one union territory, boasting a network of 172 branches and 174 ATMs.

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