The initial public offering (IPO) of Capital Small Finance Bank will hit Dalal Street on Wednesday, February 7, and conclude on February 9. The lender has fixed a price band between ₹445-468 per share for its ₹523-crore issue.
SWOT Analysis
| StrengthLow write offs (rare sight to see in numbers of a lender)Sustainable net npa ratio over the last few yearsAmongst peers, has the lowest concentration of top 20 at just 6.68%CASA ratio of 37.8% is one on the healthier side amongst peers | WeaknessRegional concentration risk (north)Dependency on rural & semi-urban economy for growthProvision coverage is on the lower side |
| OpportunitiesSecured portfolioBranch driven model – closer reach to customersAsset quality has been steady with net npa ratio of ~1.35% levels over the last 2.5 years | ThreatsCompetitionRegular intervention by RBIEntered into business with KMPs or their relativesRural market is showing stress signs |
Peer Comparison
| Peer Comparison | Jana SFB | Equitas SFB | Ujjivan SFB | Utkarsh SFB | Capital SFB |
| AUM, ₹cr | 23,029.56 | 32,776.00 | 27,743.00 | 16,407.00 | 5,865.94 |
| NIM, % | 7.78% | 8.37% | 8.80% | 9.70% | 4.00% |
| Cost to income, % | 58.48% | 63.63% | 56.23% | 54.66% | 62.35% |
| PCR, % | 64.92% | 55.97% | 92.51% | 93.80% | 50.96% |
| CRAR, % | 17.50% | 20.24% | 24.37% | 23.18% | 20.72% |
| GNPA Ratio, % | 2.44% | 2.53% | 2.18% | 3.04% | 2.73% |
| NNPA Ratio, % | 0.87% | 1.13% | 0.17% | 0.19% | 1.36% |
| P/BV, x | 1.43 | 2.01 | 2.26 | 2.37 | 1.81 |
Financials
| Asset Quality | FY22 | FY23 | H1FY23 | H1FY24 |
| Gross NPA (₹cr) | 117.13 | 152.63 | 135.11 | 160.42 |
| Net NPA (₹cr) | 63.23 | 74.05 | 69.42 | 78.67 |
| Gross NPA (%) | 2.50 | 2.77 | 2.60 | 2.73 |
| Net NPA (%) | 1.36 | 1.36 | 1.35 | 1.36 |
| PCR (%) | 46.02 | 51.48 | 48.62 | 50.96 |
| Movement of NPAs, ₹cr | H1FY24 | H1FY23 | FY23 | FY22 | FY21 |
| Opening | 152.63 | 117.13 | 117.13 | 78.24 | 58.51 |
| Slippages | 44.53 | 40.54 | 154.37 | 78.11 | 24.85 |
| Annualised slippage ratio, % | 1.52 | 1.56 | 2.80 | 1.67 | 0.66 |
| Recoveries | 29.85 | 9.86 | 20.71 | 6.19 | 3.45 |
| Upgrades | 6.87 | 12.66 | 98.06 | 32.97 | 1.65 |
| Write offs | 0.01 | 0.05 | 0.12 | 0.07 | 0.02 |
| Write offs as % of Opening GNPA | 0.01 | 0.04 | 0.10 | 0.08 | 0.03 |
| Closing | 160.42 | 135.11 | 152.63 | 117.13 | 78.24 |
| Net NPA | 78.67 | 69.42 | 74.05 | 63.23 | 42.14 |
| GNPA Ratio, % | 2.73 | 2.60 | 2.77 | 2.50 | 2.08 |
| NNPA Ratio, % | 1.36 | 1.35 | 1.36 | 1.36 | 1.13 |
| PCR, % | 50.96 | 48.62 | 51.48 | 46.02 | 46.14 |
| Profit & Loss Statement (₹cr) | FY22 | FY23 | H1FY23 | H1FY24 |
| Interest Earned | 578.22 | 676.01 | 320.73 | 385.98 |
| Interest Expenses | 322.94 | 354.02 | 169.37 | 215.01 |
| Net Interest Income | 255.28 | 321.98 | 151.36 | 170.97 |
| Other Income | 54.19 | 49.48 | 22.08 | 29.23 |
| Net Income | 309.47 | 371.46 | 173.44 | 200.21 |
| Operating Expenses | 196.25 | 222.75 | 106.91 | 124.82 |
| Operating Profits | 113.21 | 148.70 | 66.53 | 75.38 |
| Provisions | 50.65 | 55.11 | 26.16 | 20.99 |
| Profit after Tax | 62.57 | 93.60 | 40.37 | 54.39 |
| Ratios, % | FY22 | FY23 | H1FY23 | H1FY24 |
| Yield on Advances | 10.9% | 10.8% | 10.6% | 11.1% |
| Cost of Funds | 5.2% | 4.9% | 5.0% | 5.7% |
| CRAR | 18.6% | 18.9% | 18.6% | 20.7% |
| NIM | 3.7% | 4.2% | 4.1% | 4.0% |
| Cost to Income ratio | 63.4% | 60.0% | 61.6% | 62.3% |
| ROE | 92.0% | 1.2% | 1.1% | 1.3% |
| ROA | 13.0% | 16.6% | 15.3% | 16.5% |
| Particulars | H1FY24 | H1FY23 | FY23 | FY22 | FY21 |
| RWA, ₹cr | 4,522.91 | 4,117.89 | 4,284.43 | 3,716.90 | 3,038.02 |
| AUM, ₹cr | 5,865.94 | 5,192.73 | 5,507.27 | 4,688.70 | 3,762.99 |
| RWA to AUM Ratio, % | 77.10 | 79.30 | 77.80 | 79.27 | 80.73 |
| Disbursements, ₹cr | 4,961.00 | 3,845.00 | 17,797.00 | 10,549.00 | 7,462.00 |
| Dupont Table based on Assets | FY22 | FY23 | H1FY23 | H1FY24 |
| Interest income | 8.1% | 8.5% | 8.4% | 9.2% |
| Interest expenses | 4.5% | 4.4% | 4.4% | 5.1% |
| Net interest income | 3.6% | 4.0% | 4.0% | 4.1% |
| Other income | 0.8% | 0.6% | 0.6% | 0.7% |
| Net income | 4.3% | 4.6% | 4.6% | 4.8% |
| Opex | 2.7% | 2.8% | 2.8% | 3.0% |
| Operating profit | 1.6% | 1.9% | 1.7% | 1.8% |
| Loan loss provisions | 0.7% | 0.7% | 0.7% | 0.5% |
| RoAA | 0.9% | 1.2% | 1.1% | 1.3% |
| RoAE | 12.1% | 15.3% | 14.5% | 15.3% |
| Leverage | 13.87 | 13.09 | 13.68 | 11.79 |
Company background
Capital Small Finance Bank Limited was incorporated on May 31, 1999. Having no holding company, Capital SFB commenced operations as India’s first small finance bank in 2016 pursuant to RBI’s approval dated March 4, 2016. The bank offers a range of banking products on the asset and liability side, in all the states they operate in, i.e., Punjab, Haryana, Delhi, Rajasthan, Himachal Pradesh and Union Territory of Chandigarh. Their asset products primarily include agriculture loans, MSME and trading loans (working capital, machinery loans etc.) and mortgages (housing loans and loans against property).
The bank focuses primarily on the middle-income customer segments with 41.62% of their branches in rural areas, 34.68% branches in semi-urban areas and 23.70% of their branches in urban areas as on September 30, 2023.
As of September 30, 2023, they were present in 5 States and 1 Union Territory with 173 branches and 175 ATMs with 76.30% of their branches located in rural and semi-urban areas covering 24 districts and 75.75% of their total customers (both credit and deposit). The Bank has opened 126 branches since their conversion into an SFB taking the branch tally up to 173 branches.
The bank generates fee income from products and services such as forex and money transfer, outward remittances, safe-deposit lockers, distribution of life insurance and general insurance products, 3-in-1 demat and trading account and other ancillary services. As on September 30, 2023 and March 31, 2023 respectively, 99.85% and 99.82% of their loan book was secured (with 84.26% and 85.16% of the loans secured by immovable properties).
From Fiscal 2021 to 2023, the operating profit and profit after tax grew at a CAGR of 44.23% and 51.49%, respectively.
They have average gross NPA ratio of 2.52% and average net NPA ratios of 1.30% with negligible write offs as a percentage of loan book for previous 3 Fiscals and first half of current fiscal year from Fiscal 2021 to 6 months period ended September 30, 2023.
As on March 31, 2023 and September 30, 2023 they had CASA ratio of 41.88% and 37.76% respectively resulting in low cost of funds of 5.11% and 5.68% respectively. Their cost of funds stood at 5.68% and 5.11% for the 6 months ended September 30, 2023 and Fiscal ended March 31, 2023.
First Published: Feb 7, 2024 8:51 AM IST
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