Capital Small Finance Bank Limited

Capital Small Finance Bank Limited -IPO DETAILS 

Company Overview 

Capital Small Finance Bank, India's first Small Finance Bank, commenced operations in 2016. Prior to transitioning into a Small Finance Bank, Capital SFB operated in the banking sector as a non-NBFC Microfinance entity since 1999. The bank primarily focuses on offering agricultural loans, MSME loans, trading loans, and house mortgage loans. Its operational footprint initially concentrated on the northern Indian states of Punjab, Haryana, Rajasthan, Delhi, Himachal Pradesh, and Union Territory. 

As of September 30, 2023, Capital SFB has established a presence in five states and one Union Territory, boasting 173 branches and 175 ATMs. A significant portion, 76.30%, of its branches are strategically located in rural and semi-urban areas across 24 districts, serving 75.75% of its total customer base. The bank prudently maintains a diversified loan portfolio, with 99.85% of its loans secured. Its asset quality indicators are commendable, with an average gross NPA (Non-Performing Assets) of 2.52% and Net NPA of 1.3% as of September 2023. Capital SFC maintains a healthy CASA (Current Account Savings Account) ratio of 41.88%, with 97.9% of its total deposits stemming from the retail segment, indicative of strong customer engagement and trust. 

Objective of the IPO 

Here are a few quick reasons why company is going public:  

1. The net proceeds of Rs. 450 crores raised from the IPO will be allocated towards bolstering the bank's Tier-I capital. 

Company Financials 

Key Performance Indicator 

Pros 

1. The bank maintains a strong retail focus and boasts a high CASA ratio of 42% as of FY23. This high CASA ratio signifies a substantial portion of deposits held in current and savings accounts, thereby reducing the cost of borrowing for the bank. 

2. The bank's loan portfolio is predominantly secured, with 99.85% of loans backed by collateral, primarily secured against immovable properties. This ensures a lower risk profile for the bank's lending activities. 

3. Since obtaining Small Finance Bank (SFB) status, the bank has experienced notable improvements across various metrics. Both deposits and advances have witnessed significant growth, accompanied by enhancements in profitability and cost-to-income ratio. These positive trends underscore the effectiveness of the bank's strategic shift to an SFB model. 

4. Additionally, the bank demonstrates a customer-centric approach, with a keen understanding of its target demographic. Its primary focus lies on serving customers from the middle-income segment, reflecting a commitment to meeting the diverse financial needs of its client base. 

Cons 

1. As a Small Finance Bank, Capital is obligated to adhere to numerous regulatory requirements stipulated under the Banking Regulation Act. Non-compliance with these regulations could subject the bank to penalties imposed by regulatory authorities. 

2. One significant risk faced by SFBs is the potential for Non-Performing Assets (NPAs), particularly due to their microfinancing activities in rural and semi-urban areas. Economic downturns can exacerbate this risk, as witnessed in FY20, resulting in distress to the bank's asset quality. 

3. Furthermore, the intensified focus on financial inclusion has spurred heightened competition within the sector. Multiple SFBs are aggressively expanding their presence in rural and semi-urban regions, intensifying competition for market share and customer acquisition. 

How to Apply for this IPO 

1. Go to https://ipo.adityatrading.in/ 

2. Enter your Client ID 

3. Enter the OTP received in your registered mobile number. 

4. Choose the IPO and click on apply button. 

5. Enter the UPI ID, Quantity, and Cut off the price. 

6. Click on submit button 

7. Confirm the mandate request received on your phone by entering the UPI Pin. 

You can also watch our youtube video on “How to Apply on IPO” by clicking on the link “https://www.youtube.com/watch?v=1qOI8dCpl1I&ab_channel=ATS”