CSB Bank Ltd.- Information Note

CSB Bank Ltd.- Information Note
21/11/2019

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens: November 22, 2019

Issue Closes: November 26, 2019

Price Band: Rs193- 195

Face Value: Rs10

Public issue: Rs~1.98cr shares and up to Rs24crs primary

Issue Size: ~Rs410cr

Bid Lot: 75 equity shares

% Shareholding

Pre IPO

Promoter

50.09

Public

49.91


Company Background

CSB Bank Ltd (Formerly known as The Catholic Syrian Bank Limited) offer a wide range of products and services to its overall customer base of 1.3 million (as on September 30, 2019), focusing particularly on SME, Retail, and NRI customers. They have four principal business areas, viz., (a) SME banking, (b) retail banking, (c) wholesale banking, and (d) treasury operations. The bank delivers its products and services through multiple channels, including 412 branches (excluding three service branches and three asset recovery branches) and 290 ATMs spread across 16 States and four Union Territories as on September 30, 2019. The bank’s advances were Rs11,298cr for the six-month period ended September 30, 2019. Its overall deposits were Rs15,510cr for the six-month period ended September 30, 2019. Its CASA deposits were Rs4,372cr as on September 30, 2019 and its CASA ratio was 28.19% for the six-month period ended September 30, 2019.

Object of the Offer

The Offer comprises of the Fresh Issue and the Offer for Sale. The objects of the Offer are to achieve the benefits of listing the Equity Shares on the Stock Exchanges and for the Offer for Sale. The objects of the Fresh Issue are to augment Bank’s Tier-I capital base to meet its future capital requirements which are expected to arise out of growth in bank’s assets, primarily loans/advances and investment portfolio and to ensure compliance with Basel III and other RBI guidelines.

Financials

Figures Rscr

FY17

FY18

FY19

H1FY20

Total Income

1,617

1,422

1,483

817

PBT

(100.4)

(194.9)

(97.6)

68.9

PAT

(58.0)

(127.1)

(65.7)

44.3

Basic EPS (Rs)

(7.7)

(15.7)

(7.9)

3.9

RoNW (%)

(10.6)

(35.9)

(6.7)

2.9

Net Asset value per equity share (Rs)

67.5

43.7

73.5

89.2

Source: RHP

For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only

Key Points

CSB Bank provide its products and services primarily through an extensive physical network of branches and ATMs. They operate in 16 States and four Union Territories in India, reaching 1.3 million customers through 412 branches (excluding three service branches and three asset recovery branches) and 290 ATMs, as on September 30, 2019. With over 98 years of history, the bank believes that it has developed a well-recognized and trusted brand in south India, particularly in the states of Kerala and Tamil Nadu, where it has built strong relationships with its customers, which has been one of the key growth drivers. The bank is known for its consistent approach in developing long-term relationships with its customers, based on its local knowledge and experience, amongst other things. The bank’s strong gold loan portfolio is a testimonial to the trust placed in the brand by its customers. Its deposit renewal rate has increased from 88.01% as of March 31, 2017 to 93% as of March 31, 2018 and to 97.24% as of March 31, 2019. Further, its deposit renewal rate was 97.86% as on September 30, 2019.

The bank’s capital position has been significantly strengthened post FIHM’s investment in the Bank. Pursuant to a preferential allotment of equity shares and warrants to FIHM, for which the bank has received Rs721cr in Fiscal 2019 and the balance amount of Rs487cr in Fiscal 2020, CSB Bank has a strong capital base for growth acceleration, something which the bank was not able to accomplish in past due to paucity of capital. As per the Basel III Norms, the CRAR, as assessed by the bank as on March 31, 2019 and September 30, 2019, was 16.70% and 22.77% (including capital conservation buffer), respectively. As on March 31, 2019 and September 30, 2019, the bank’s Tier 2 CRAR stood at 0.67% and 0.66%, respectively and therefore the bank has significant head room available to raise Tier 2 capital to supplement its strong Tier 1 capital base.

Key Risk

If the bank is unsuccessful in controlling or reducing its impaired loans, or if there is a significant increase in impaired loans or deterioration in the quality of the assets that the bank holds as security, the bank’s future financial performance could be materially and adversely affected.

The bank has regional concentration in southern India, especially Kerala. Any adverse change in the economic, political, or geographical conditions of Kerala and other states in southern India can impact its results of operations.

Research Disclaimer

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What is ELSS Funds and How they are Helpful for Tax Savings?

What is ELSS Funds and How they are Helpful for Tax Savings?
03/12/2019

ELSS fund or Equity Linked Savings Scheme fund is a tax-saving scheme that derives their returns from the equity market. The ELSS funds come with a lock-in period of three years. The investor cannot withdraw from the ELSS scheme during this duration. The ELSS fund gives twin advantage of capital appreciation and tax benefits.

The ELSS funds are mostly open-ended mutual funds. They help the investor to save tax under the Section 80C, and the taxable deduction available for this investment is upto Rs.1,50,000. The ELSS funds are suitable to inculcate the habit of saving among investors as the lock-in period prohibits the withdrawal of the investment for three years.

The ELSS comes with a low investment threshold of Rs.500 and the investor need not make a one-time investment for ELSS.  They can opt for the Systematic Investment Plan(SIP) method where they will invest a pre-set amount on a specified date of every month or six months. Through the SIP method, the investor has the option to spread their investments over the year, and this saves the last minute rush for searching for investments that help in tax savings.

However, when the investors opt the method of SIP payment, they should be aware of the fact that every SIP payment is considered as a fresh investment and it has an individual locking period of three years. The ELSS funds are the only investment with a low lock-in period of three years when compared to other tax saving investments.

When calculating SIP for the ELSS investment, the investor has to make sure that their investments are spread over the year. The investor has to use this simple formula to arrive at their SIP calculation

The ELSS funds come with two options for Growth and Dividend. The investor can choose the option that aligns with financial goals.

Growth option:

In this option, the investment along with its profit is accumulated, and the total amount is paid to the investor at the end of the lock-in period with an option of reinvestment.

Dividend Option:

The dividend option comes with two choices of dividend payout and dividend reinvestment. In dividend payout, the investor will receive the payment of a dividend from time to time. In dividend reinvestment, the payout is reinvested, and it will be treated as a fresh investment with the benefit of a tax deduction

The tax saving feature of ELSS funds:

Under Section 80C of the Income Tax Act,1961 a tax payer can claim up to Rs.1,50,000 as relief against their investments. Under the new budget rules, the long-term capital gains (for investments held more than one year) exceeding more than Rs.1,00,000 are subject to 10% tax without benefit of indexation.

The ELSS funds are the best option as tax saving investments as they have the power to give benefits of high returns with the flexibility of investment and the lowest lock-in period when compared to other investments.

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How to Prepare for Next Bear Phase in Stock Market?

How to Prepare for Next Bear Phase in Stock Market?
04/12/2019

What exactly do we understand by a bear phase in the stock market? While there is no hard and fast definition of a bear market, the accepted standard definition is a correction of 20% from the peak of stock market. It is normal for stock broker and investors to panic in the face of a bear market and act instinctively. The result is that you end up losing opportunities which the bear market offers. Bear markets are not about jumping in and buying every stock that has corrected. Here is how you can prepare for a bear market.

Remember, bear markets are always more severe on some sectors

If you look back at the bull markets of the last 25 years, then the bear markets subsequent to such rallies have followed a similar pattern. The maximum damage has happened in stocks that triggered the rally in the first place. Post 1992, it was the cement pack that corrected the sharpest. Post the technology rally in 1999 even frontline stocks like Wipro and Infosys corrected more than 75%. Much worse was the damage to realty and infrastructure stocks post 2008. Most of the stocks lost over 95% of their peak value. As a strategy, prepare to exit the drivers of the bull rally first in any bear market. Such stocks are not meant to be bought on dips. This is the basic rule that should guide stock broker strategy in the bear phase of stock market.

Stay low on leveraged positions in the market

The problem with bear markets is that they are also accompanied by a rise in volatility and a fall in buying demand. This widens the spreads on stocks. In the markets, you can be leveraged in two ways. You can either borrow to invest or you can trade on margin. In both cases, bear markets are the time to cut down on your leveraged positions. Even if your view is right, the spurt in volatility may trigger stop losses. Minimize your leveraged positions in a bear market as it can draw you into a vicious cycle of trading losses.

Look for asset classes beyond equity

More often than not, we end up believing that equities are the only place to invest and end up making wrong decisions. There are asset classes beyond equity that can protect value in bad times. For example, gold has typically done very well when equity markets have fallen. Similarly, liquid funds and debt funds can also give much more stability to your portfolio. Even within your equity portfolio, look to diversify across themes. If you spread your portfolio across themes and sectors, you stand a very good chance of doing well compared to putting all your eggs in one basket.

Bear market is the time to restructure and rebalance your portfolio

If you were waiting for the right time to change your portfolio mix, then for stock broker the bear stock market is the right time to rebalance and restructure your portfolio . As we said earlier, first get out of the stocks and themes that triggered the bull market in the first place. Shift your stocks from high beta names to low beta names. They will hold value much better. In any bear market, the mid caps and small caps face the maximum damage. You can prepare yourself by shifting out of such stocks well in advance. Focus more on companies that follow relatively higher standards of corporate governance and disclosure practices. They are likely to give fewer negative surprises in a bear market.

If we can just focus on these defences, bear markets can be easily and methodically handled!

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How to Secure your Portfolio Against Fall in Nifty?

How to Secure your Portfolio Against Fall in Nifty?
06/12/2019

The Nifty chart over the last 18 years shows a secular up move in the index. However, within the overall trend, there have been bouts of severe volatility and sharp corrections. We have seen big corrections in the market in 2000, 2008 and 2013. The corrections have ranged from 20% in 2013 to as high as 62% in 2008. As an investor, it is not always possible to enter at the bottom and exit at the top because markets tend to be counter-intuitive. How do you adopt a systematic approach to securing your portfolio against a fall in the Nifty? There are some proactive solutions and some reactive ones.

Chart Source: Google Finance

It would be very simple to say that over the long run the Nifty has made profits. The bigger question is how to shield against short term volatility.

1. Time to reallocate – Buy into strength and sell into weakness

This is a cardinal approach to handling a correction. Even when the NBFC crisis broke out in late 2018, Dewan Housing corrected more than LIC Housing or Bajaj Finance. That is why, it is always essential to buy into strength and sell into weakness in a falling market because weak stocks become vulnerable. When you reallocate your portfolio, it has a cost but it would be smarter than just watching your portfolio depreciate. Quite often, investors use discrete options like averaging or exiting altogether. There is a mid-way approach.

Why are we talking about buying into strength? When the Nifty corrects, it separates the men from the boys. In 2000, technology stocks caused the crash. Over the last 18 years stocks like Satyam, Pentamedia, DSQ and many more vanished. But stocks like Infosys, TCS and Wipro have only emerged stronger. The rule is to exit frothy stocks immediately.

2. Seriously consider farming your losses for tax purposes

In India, tax farming is quite popular among HNI investors. If you are holding on to stocks and it is down in the last 6 months, you can book a loss and write it off against other gains. This reduces your capital gains tax liability. Now that LTCG is also taxed on equity, this can be applied to LTCG and to STCG. By farming losses, you don’t lose anything but the notional loss is converted into a real loss and reduces your overall tax liability. Even if you don’t have gains in this year, you can still farm these losses and carry forward for a period of 8 years.

3. Make the best use of hedging tools

The stock market offers you a variety of hedging tools. You can sell futures against your stock to lock in profits and keep rolling over. Alternatively, you can buy lower put options to limit you risk in a falling market; either in the stock or the index. You can even sell higher call options to reduce your cost of holding. In short, F&O offers you a plethora of opportunities to protect and also benefit from a falling Nifty.

4. A phased approach will be a good shield against a falling Nifty

The best of traders are not able to call tops and bottoms of the market consistently. When the market is falling, you normally believe that you have a choice between staying out and catching a falling knife. But there is a third option. You can adopt a phased and systematic approach to investing, at least till the time the volatility normalizes. Focus on managing your risk. One of the basic rules you must follow is to be true to your long term goals. They don’t need to be impacted by Nifty volatility and SIPs tagged to these goals must go on.

5. Keep liquidity handy to buy stocks at lower levels

A sharp correction in the Nifty can also offer bargains. But the trick is to ensure that you have liquidity in your hand when it matters. So, it is time to selectively roll your shopping trolleys out. You were happy to purchase HUVR at 1900 then why not at Rs.1500? A lot of quality stocks also correct in sympathy. Look for bargains and buy quality at cheap prices.

A falling Nifty calls for a mix of proactive and reactive actions to protect the value of your portfolio and make the best of opportunities. It is not too complicated!

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Everything you need to know about Burger King IPO

Everything you need to know about Burger King IPO
by Mrinmai Shinde 12/01/2020
Quick service restaurant chain, Burger King India is launching its three-days long IPO from 2nd December to 4th December. The company has set the price band at ?59-?60 per share for its IPO.

Through the IPO the company aims at raising ?810 crore. Of the total amount the promoter entity QSR Asia Pte Ltd will sell up to 60 million shares, which would amount to ?360 crore while a fresh issue of shares will aggregate to ?450 crore. The company has also raised a pre-IPO funding of ?92 crore from public markets investor Amansa Investments Ltd at ?58.5 per share.

Burger King IPO details at a glance

IPO Date

Dec 2, 2020 - Dec 4, 2020

Finalisation of Basis of Allotment

Dec 9, 2020

Initiation of refunds

Dec 10, 2020

Transfer of shares to demat accounts

Dec 11, 2020

Listing Date

Dec 14, 2020

Issue Size

?810.00 Cr

Fresh Issue

?450.00 Cr

Offer for Sale

?360.00 Cr

Face Value

?10 per equity share

IPO Price

?59 to ?60 per equity share

Min Order Quantity (each lot)

250 Equity Shares

Min Amount Cut off

?15,000

Maximum Lots allowed

3250 Shares (13 lots)


Want to know our suggestion? Read here - Burger King IPO Note.

Things you need to know:

Burger King India Limited is one of the fastest growing international QSR chains in India during the first five years of operations based on the number of restaurants. Talking about the global presence, when measured by the number of restaurants, with a network of 18,675 restaurants in over 100 countries, Burger King is the second-largest fast food burger brand globally. In India, the company owns 261 restaurants which include eight Sub-Franchised Burger King Restaurants, across 17 states and union territories and 57 cities across India.

Burger King India has exclusive franchise rights in India and a strong customer value preposition. Apart from the customer loyalty and brand value, strong management and a vertically scalable supply chain are the company’s key strengths. The company will use the funds raised through the IPO to finance the roll-out of new company-owned Burger King Restaurants, repayment or prepayment of outstanding borrowings and to meet the general corporate purposes.

If you are looking for the short-term gains through the IPO, you need to bear in mind that if there is a spike in the Covid cases and there is another round of lockdown, then the business might take a hit. The termination of the Master Franchise and Development Agreement could also pose a threat to the business. Lack of identification of the locations when expanding in new regions, and deteriorating relations with third party delivery aggregators apart from perceived and real health concerns along with shifting food preferences and habits are a few things to look for. Having said that, the investment would turn out to be promising in long term.

This year has seen a lot of good IPOs, which has encouraged a lot of new investors to enter the markets. Apart from Burger King, the other companies that issued IPOs this year include SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Route Mobile, Happiest Minds Technologies, Angel Broking, Chemcon Speciality Chemicals, Computer Age Management Services, Mazagon Dock Shipbuilders, UTI AMC, Likhitha Infrastructure, Equitas Small Finance Bank and Gland Pharma.

How to apply for Burger King IPO?
  • In 5paisa Trading App, go to IPO Section reflected on the home screen
  • Click on Apply IPO
  • Enter Quantity and Price to bid for
  • Enter UPI id to block funds on
  • Later in the day you will receive funds block confirmation in your UPI app, which needs to be approved

If you are not a 5pasia customer, you can apply for the IPO using any supported UPI apps. Click here to find the list of UPI apps and banks supporting the IPO application.

Watch the video below to know more about the Burger King IPO

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Union Budget 2020 – What’s It All About?

Union Budget 2020
01/02/2020

Budget 2020 was rich on expectations but the exemptions in the budget were much lower than what the market desired. The impact was visible in the performance of the stock market indices which cracked in response. While a detailed analysis is still due, the immediate reaction of the market appears to be that there was no big bang announcement in the Union Budget despite the tough macro conditions. Here are some of the major announcements in the Union Budget 2020.

Response to macro pressures

  • Nominal growth for fiscal year 2020-21 has been pegged at 10%. The real rate of GDP growth could be in the range of 5.5% to 6% depending on the nominal growth actually achieved as even 10% does look quite steep at this point in time.

  • The budget 2020 has fully utilised the 50 bps leeway on fiscal deficit offered by the N K Singh Committee. For 2019-20, the fiscal deficit has been pegged at 3.8% instead of 3.3% while for the fiscal year 2020-21 it is pegged at 3.5% instead of 3%.

  • There is some positive impact on post-harvest infrastructure. To improve post harvest infrastructure, including cold storage, the budget has announced viability funding based on public-private-partnership. Indian Railways will run dedicated trains to support the cold chain plan.

Some cheer for Corporates and MSMEs

  • Despite the lack of any cost advantage, the Budget 2020 has outlined big plans for manufacture of mobile phones and electronic equipment and semiconductor packaging. In addition, the 15% concessional tax will be extended to the power sector too.

  • Finally, MSMEs have something to be really pleased about. Invoice financing via the factoring method will be extended to MSME as will be the issue of subordinated debt to MSMEs and handholding in the early stages.

No cheer for markets and that was evident

  • LTCG on equity stocks and equity funds was not scrapped, despite the STT being introduced in 2004 in lieu of LTCG tax. This is resulting in the cascading effect of STT plus LTCG tax and that is adding to the costs of traders and investors.

  • While DDT has been scrapped on equity and on equity funds, it comes back in another form. At the same time, the dividend distribution tax on debt funds will continue as before. There will be a single point of taxing dividends as other income at the applicable peak rates of tax for individuals.

  • Efforts are being made to reduce tax burden on middle class. People earning in the range of Rs.5 lakh to Rs.15 lakhs will see reduction in taxes.

Direct tax; more complicated than effective

  • Direct tax regime has suddenly become a lot more complicated. There will be two regimes; first regime will focus on status quo with all exemptions and rebates. The new regime with lower rates applicable will be devoid of exemptions and rebates. Loss of exemptions could be a big cost as many exemptions are virtually mandatory or inevitable like life premiums, provident fund, tuition fees, home principal etc.

  • Under the new tax regime, direct taxes will be as under:

Income bracket

Below 5l

5l to 7.5l

7.5l to 10l

10l to 12.5l

12.5l to 15l

Above 15l

Tax Rate (%)

Zero

10

15

20

25

30

Above table represents the new regime. If you opt for the second option, then your IT form will be auto-filled. That simplicity appears to be the only visible advantage.