The private sector lender CSB Bank Shares started off the first day at Rs 275 on the NSE on December 4, a premium of 41 percent over issue price of Rs 195.
At 10:36 hours IST, the stock was trading at Rs 301.40 on the exchange, up 54.87 percent over issue price.
CSB Bank?s Rs 410-crore initial public offering (IPO) was subscribed a whopping 86.89 times last month.
The IPOs premium listing was justified, assuming turnaround in business efficiency which is expected to further improve going forward, and with overwhelming response to IPO.
After the new promoter took charge of its affairs in FY19, CSB Bank has seen a remarkable turnaround. The impact is visible in the second half of FY20 numbers where CSB returned to the black after posting losses for three consecutive years.
Nearly 60 per cent of the bank?s portfolio is made of SME and secured gold ornaments which are safe bets. Going ahead, it is expected that the bank will report better return on equity (RoE) and consistently improve its performance. The stock can be a good play? from a long-term perspective, but the bank will take time to deliver even a 1 per cent return on assets (RoA) amid a weak operating environment, with higher exposure to the MSME segment.
As the share is already trading at a premium of more than 50 percent from its listing price, we think the turn around and growth story of the bank is already priced in. Existing investors should make out of this opportunity and book profits at this time. If they want to capture the long-term growth prospect of the bank, they can re-enter the stock in future at any dip. ?At this point investors can consider better option and can buy shares of other bank with more established RoA like Federal Bank, RBL Bank and DCB, which trade at a discount to CSB Bank.
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