Capital Small Finance Bank is a small size bank in north India. they started their business on the upper side of because the bank’s founder has a strong knowledge of that area.
Capital SFB stock underperforms from the listing date. Why was company stock listed lower and fell from the IPO price. Is everything is good in the company? what are small finance banks are they safe?
Capital Small Finance Bank Business Model
Generally, all banking companies have the same business model only difference is that some banks focus on corporate players, and some focus on loans.
While Capital SFB focuses on secured loans and middle-salary group people. They have a very secured loan portfolio that is about 99%, the highest in the industry as compared to peers.
Companies give less unsecured loans to customers. The Company was India’s first small finance bank when RBI permitted it to start entering that sector. Basically the company started back in 1999 but they launched their application and website in 2015.
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Financial Performance of Capital Small Finance Bank
The Market capitalization of the company is 1,623 Crores in April 2024 with 73% operating profit margins and 13% net profit margin. Generally, banks have high margins.
They have a low CASA ratio, which shows how much deposits are coming in savings accounts as compared to current accounts. When people deposit more money in saving account than banks unfortunately give more profit to customers.
They grew from 557 Cr to 725 Cr in FY2023- 2024 and net profit doubled in the last three years. Everything is fine with the bank except the CASA ratio. Bank raised growth capital to expand their ATM base presence in the south side of the country.
Why Stock Fall From IPO Levels ?
That is totally depend on market sentiment and how traders and investors see company’s growth. Stock listed on exchanges on 14 Feb at 430 rupees. Currently stock is trading at 361 per share and it is 21% down from IPO levels.
Fundamentally company’s finances were great but due to low subscription ratio from NII and DII stock fell on listing day.
Other companies also have the same date of listing so people were confuse which IPOs good this is also one of the reasons for negative listing.
Will Capital SFB Outperform Peers in future Or Not ?
Pre IPO price to earning ratio was at 17 now due to the stock price fall it becomes cheaper. Currently, it stands at 14, and RoNW was 15% means they generate good money on shareholder’s funds.
The Company grew at a 54% compounded profit growth rate which is awesome for investor to enter into stock. Return on equity was 17% last year.
If the company maintains this type of growth in the future then definitely stock will touch new highs. In the latest interview with Zee Business managing editor Anil Shinghvi CEO said, ” We want to increase our presence in Maharashtra and Gujarat. Our focus is primarily on increasing ATMs in all states. This capital we are raising through IPO will go into business expansion.”
The Stock reached a lifetime low at 320 and recovered from that level and slowly in an upward direction. Stock faces pressure at 380, according to our analysis if if they break then direct go to 430.