The Church has formed a “CSB Protection Committee”, saying any attempt to merge CSB with any other bank would be resisted. Its patron Bishop Andrews Thazhath started all the efforts to ensure that “the bank which is dear to the people of Thrissur retains its identity”
Bangkok-based non-resident Indian Surachan Chawla bought a stake of about 38% from the investors of the Bank has already sold 5% to Federal Bank. Chawla came into the picture not now, but back 1998. In between Chawla was given a heavy right issue of 32 lakh shares at a premium of mere Rs. 22 in Aug 2008, when the total number of shares were approx 1.3 crores, whereas the right issue to others in Feb 2009 was at a premium of Rs. 110.
Due to RBI restrictions, Chawla will have to reduce his holdings to 10%. Now he is trying to sell the difference to Federal Bank..
Now only we got serious... the church woke up...
Now the latest move...
Three Directors of the Bank, Mr. Anatharaman and other two who hold 15% of the shares turned out to be the so called "saviors" of the church.
In between, see the true colors of the saviors...
a report from Economic times on 29 Aug 2009:
MUMBAI: New faces on the board of Catholic Syrian Bank
(CSB) could pave the way for the unlisted bank’s merger with another Kerala-based private bank Federal Bank — a deal which has been in limbo for more than a year.
The CSB board has just inducted three new directors — I Peter, a former Federal Bank official, and two finance professionals, TS Anantharaman and S Bhasin, — all of whom are understood to be backing the proposed merger. The new appointments were approved at the bank’s AGM in Thrissur on Monday. The new members have come in place of Dr KA Menon and George Sebastian, who reportedly had some reservations about the deal, and George Chemmanur who had stepped down earlier.
“The AGM was over in less than two hours, and a predominant majority on the new board could favour the deal,” said a source familiar with the development. At present, only two on the 13-member CSB board are opposed to the deal.
Some of the other large shareholders in CSB are three Hong Kong-based private equity funds owning about 5% stake each; a clutch of companies based in Thrissur — the bank’s headquarters —with a combined 12-13% stake (represented by these Directors), while the remaining shares are widely held among local residents and community members.. approximately 20,000 individual shareholders.
Each share has a book value of 205.68 and the sales value would be approx around 300 ( based on the Federal Bank deal). So the investment required is around 150 crores, which could be gathered only from at least 3000 investors at an average of 5 lakhs each. So it will add only to the 20000 individual shareholders who are not in the controlling body. Again the ball is back in the court of others..
Any other major player can snatch away the bank from us... and we will be again in the same situation.
What the Church should do?
The church, can float private equity funds on a Diocese Basis similar to trusts/cooperatives with transparent accounts and audits .. We do have many strong businessmen who can support the church for a noble cause.
Let the Church Fund invest in the Bank on a collective basis. To overcome the RBI restriction each Diocese can limit the investment to 5%. This will help the church to appoint directors in the Board of the Bank, as well as help the investment stay, without drifting away, as happened in the past.
Even such a fund was helpful in case of Deepika or Jeevan, to protect the interests of the Church. Let us correct our mistakes from the past lessons. Let us go for a permanent solution, rather than just trying to get rid of Chawla or Federal Bank.
Instead of relying on third parties and again repeating the mistake of scattered shareholding, hope let the church leaders come forward to take the right decisions.
I have tried to convince the situation to such a meeting presided by Rev Fr. Raphael Thattil.. But I was the bad guy out... this adamant stand of the church will not take us anywhere.
The Return on Capital Employed in CSB in 2008-09 was only 9.57% ( 37.19 Crores)as against 11.98% in the year before. In Federal bank it was 500.49 Crores ( 11.58%) and in South Indian Bank it was 194.75 Crores ( 15.14%).
The Last Traded Price of Federal Bank was 246, ie 0.97 times of Book Value (P/BV), or 8.4 times of the Earnings per share ( PE).
The Last Traded Price of South Indian Bank is 144.50, 1.27 times of Book Value, or 8.38 times of Earnings per share.
Considering the Earnings per share of 19.70, Book Value of 205.68, the asking price is much higher than its peers, at 300. The P/BV will be at 1.46 and PE at 15.23 times.
If the earnings trend do justify the price, well and good.. but not.
CSB's dividend history from 1999 has only 4 figures.. 2005 at 17%, 2007 at 15%, 2008 at 30%, and now in 2009 at 15%. The Net profit Margins were at 6.74% in 2008 and 5.66% in 2009.
The half Year ended in September 2009 was at a net loss of 20.28 crore as against a profit of 30.35 crore in the just preceding half year. Why is it so... the declining (now, turning red) figures of Operating Profit per employee or the Operating profit per branch could tell us why.
The Earnings per share in the Half year ended in September was negative.... -10.74.
If the trend continues the dividend to expect in the next three years could be just Rs. 6, 60% of the face value of the share, while the investment is say Rs. 300.
Also if you sell these unlisted stocks, the sale proceeds would be fully taxable, and that too at 30% as proposed in the new Direct Taxes Code. Based on the trends, without a major reshuffle the growth in the book value of the share in a good extent...say over 30%, cannot be predicted. What will happen could be a sure loss.
Why did I go through the profit figures or the P/BV or PE... just to show the prices are exorbitant.
But still we should get our own "Catholic" Bank back in our pockets, just to protect our pride. കുളിച്ചില്ലെങ്കിലും കോണകം പുരപ്പുറത്തു തന്നെ ഇടണമല്ലോ! കോളാമ്പിയും കിണ്ടിയും പാരമ്പര്യം സൂചിപ്പിക്കാന് ഷോകേസില് ഇടം തേടുമ്പോള് നമ്മുടെ ബാങ്കും കൂടെ വേണമല്ലോ!
But when you and me invest a penny, we are not doing it as a charity. We will not get visa to heaven just by investing in a Catholic name.May be a few billionaires can do it for charity..
When we invest we definitely will look at the returns as well as the safety of our investments. So, when we invest money in the Bank let us do it with care. Let us see that we take our lost bank back to us, and will not leave us again. Let us have OUR MEN in charge. Let our MEN see that we are not losing, we do business very well. Achayans are not bad in businesses.
Note : The figures used in my posts are all from the published financials of Catholic Syrian Bank, and the ratios are derived from those figures.
_______________________________________________________________
(CSB) could pave the way for the unlisted bank’s merger with another Kerala-based private bank Federal Bank — a deal which has been in limbo for more than a year.
The CSB board has just inducted three new directors — I Peter, a former Federal Bank official, and two finance professionals, TS Anantharaman and S Bhasin, — all of whom are understood to be backing the proposed merger. The new appointments were approved at the bank’s AGM in Thrissur on Monday. The new members have come in place of Dr KA Menon and George Sebastian, who reportedly had some reservations about the deal, and George Chemmanur who had stepped down earlier.
“The AGM was over in less than two hours, and a predominant majority on the new board could favour the deal,” said a source familiar with the development. At present, only two on the 13-member CSB board are opposed to the deal.
According to a bank official, Mr Sebastian and Mr Menon, whose terms were coming to an end, had filed papers for reappointment, but subsequently, withdrew their nominations. Also, earlier this year, S Santhanakrishnan, who was on the Federal Bank board, joined CSB as a director. He is expected to play an important role in the merger negotiations.
CSB chairman R Venkataraman was not available for comment.
The two banks have formed core committees, which would look into the due diligence exercise that’s expected to begin next week. The transaction could be an all-cash deal, with Federal buying out the shareholders of CSB, in which the Chawlas, an NRI family, own well over 25%.
Some of the other large shareholders in CSB are three Hong Kong-based private equity funds owning about 5% stake each; a clutch of companies based in Thrissur — the bank’s headquarters —with a combined 12-13% stake, while the remaining shares are widely held among local residents and community members. Many of these investors, looking for an exit, want the deal to go through.
The proposed deal, which had been opposed by sections within the local community, had its origin sometime in mid-2008, when the Chawlas sold close to 5% equity to Federal. Sources said Federal’s management had entered into an understanding with the Chawlas for buying out the balance holding at a subsequent stage. (ET had first reported on the possible merger in its edition dated June 27, 2008). While Federal Bank had then paid around Rs 300 a share for the near 5% stake, the pricing for the entire buyout has to factor in a merger premium and changes in market conditions. (Significantly, since CSB is an unlisted entity, the shareholders will have to pay capital gains tax for whatever they receive from the deal).
Bank mergers have been far and few between in India due to resistance from employees, differences in culture and regulatory restrictions. In case of CSB, a few directors still argue that a merger will dissolve the identity of the community bank — an issue that had once driven the local Church to step in. “But what could work in the CSB-Federal deal is the similarity of culture...this is not a case of a large, new generation private bank like ICICI acquiring an old bank like Bank of Madura, which was a painful integration,” said a senior banker.
If the the deal materialises, it would enable the merged entity to become the dominant bank in Kerala, a significant deposit and remittance market. CSB, with 360 branches, has an over Rs 8,000-crore balance sheet, while Federal Bank with over 606 branches has a Rs 35,000-crore book. Federal Bank, which has been snooping around for an acquisition and even raised Rs 2,000-crore capital in 2008 to buy a bank, is keen to move fast on the deal.
Let the Church Fund invest in the Bank on a collective basis. To overcome the RBI restriction each Diocese can limit the investment to 5%. This will help the church to appoint directors in the Board of the Bank, as well as help the investment stay, without drifting away, as happened in the past.
Even such a fund was helpful in case of Deepika or Jeevan, to protect the interests of the Church. Let us correct our mistakes from the past lessons. Let us go for a permanent solution, rather than just trying to get rid of Chawla or Federal Bank.
Instead of relying on third parties and again repeating the mistake of scattered shareholding, hope let the church leaders come forward to take the right decisions.
I have tried to convince the situation to such a meeting presided by Rev Fr. Raphael Thattil.. But I was the bad guy out... this adamant stand of the church will not take us anywhere.
The Return on Capital Employed in CSB in 2008-09 was only 9.57% ( 37.19 Crores)as against 11.98% in the year before. In Federal bank it was 500.49 Crores ( 11.58%) and in South Indian Bank it was 194.75 Crores ( 15.14%).
The Last Traded Price of Federal Bank was 246, ie 0.97 times of Book Value (P/BV), or 8.4 times of the Earnings per share ( PE).
The Last Traded Price of South Indian Bank is 144.50, 1.27 times of Book Value, or 8.38 times of Earnings per share.
Considering the Earnings per share of 19.70, Book Value of 205.68, the asking price is much higher than its peers, at 300. The P/BV will be at 1.46 and PE at 15.23 times.
If the earnings trend do justify the price, well and good.. but not.
CSB's dividend history from 1999 has only 4 figures.. 2005 at 17%, 2007 at 15%, 2008 at 30%, and now in 2009 at 15%. The Net profit Margins were at 6.74% in 2008 and 5.66% in 2009.
The half Year ended in September 2009 was at a net loss of 20.28 crore as against a profit of 30.35 crore in the just preceding half year. Why is it so... the declining (now, turning red) figures of Operating Profit per employee or the Operating profit per branch could tell us why.
The Earnings per share in the Half year ended in September was negative.... -10.74.
If the trend continues the dividend to expect in the next three years could be just Rs. 6, 60% of the face value of the share, while the investment is say Rs. 300.
Also if you sell these unlisted stocks, the sale proceeds would be fully taxable, and that too at 30% as proposed in the new Direct Taxes Code. Based on the trends, without a major reshuffle the growth in the book value of the share in a good extent...say over 30%, cannot be predicted. What will happen could be a sure loss.
Why did I go through the profit figures or the P/BV or PE... just to show the prices are exorbitant.
But still we should get our own "Catholic" Bank back in our pockets, just to protect our pride. കുളിച്ചില്ലെങ്കിലും കോണകം പുരപ്പുറത്തു തന്നെ ഇടണമല്ലോ! കോളാമ്പിയും കിണ്ടിയും പാരമ്പര്യം സൂചിപ്പിക്കാന് ഷോകേസില് ഇടം തേടുമ്പോള് നമ്മുടെ ബാങ്കും കൂടെ വേണമല്ലോ!
But when you and me invest a penny, we are not doing it as a charity. We will not get visa to heaven just by investing in a Catholic name.May be a few billionaires can do it for charity..
When we invest we definitely will look at the returns as well as the safety of our investments. So, when we invest money in the Bank let us do it with care. Let us see that we take our lost bank back to us, and will not leave us again. Let us have OUR MEN in charge. Let our MEN see that we are not losing, we do business very well. Achayans are not bad in businesses.
Note : The figures used in my posts are all from the published financials of Catholic Syrian Bank, and the ratios are derived from those figures.
MUMBAI: New faces on the board of Catholic Syrian Bank Economic Times 29 Aug 2009
(CSB) could pave the way for the unlisted bank’s merger with another Kerala-based private bank Federal Bank — a deal which has been in limbo for more than a year.
The CSB board has just inducted three new directors — I Peter, a former Federal Bank official, and two finance professionals, TS Anantharaman and S Bhasin, — all of whom are understood to be backing the proposed merger. The new appointments were approved at the bank’s AGM in Thrissur on Monday. The new members have come in place of Dr KA Menon and George Sebastian, who reportedly had some reservations about the deal, and George Chemmanur who had stepped down earlier.
“The AGM was over in less than two hours, and a predominant majority on the new board could favour the deal,” said a source familiar with the development. At present, only two on the 13-member CSB board are opposed to the deal.
According to a bank official, Mr Sebastian and Mr Menon, whose terms were coming to an end, had filed papers for reappointment, but subsequently, withdrew their nominations. Also, earlier this year, S Santhanakrishnan, who was on the Federal Bank board, joined CSB as a director. He is expected to play an important role in the merger negotiations.
CSB chairman R Venkataraman was not available for comment.
The two banks have formed core committees, which would look into the due diligence exercise that’s expected to begin next week. The transaction could be an all-cash deal, with Federal buying out the shareholders of CSB, in which the Chawlas, an NRI family, own well over 25%.
Some of the other large shareholders in CSB are three Hong Kong-based private equity funds owning about 5% stake each; a clutch of companies based in Thrissur — the bank’s headquarters —with a combined 12-13% stake, while the remaining shares are widely held among local residents and community members. Many of these investors, looking for an exit, want the deal to go through.
The proposed deal, which had been opposed by sections within the local community, had its origin sometime in mid-2008, when the Chawlas sold close to 5% equity to Federal. Sources said Federal’s management had entered into an understanding with the Chawlas for buying out the balance holding at a subsequent stage. (ET had first reported on the possible merger in its edition dated June 27, 2008). While Federal Bank had then paid around Rs 300 a share for the near 5% stake, the pricing for the entire buyout has to factor in a merger premium and changes in market conditions. (Significantly, since CSB is an unlisted entity, the shareholders will have to pay capital gains tax for whatever they receive from the deal).
Bank mergers have been far and few between in India due to resistance from employees, differences in culture and regulatory restrictions. In case of CSB, a few directors still argue that a merger will dissolve the identity of the community bank — an issue that had once driven the local Church to step in. “But what could work in the CSB-Federal deal is the similarity of culture...this is not a case of a large, new generation private bank like ICICI acquiring an old bank like Bank of Madura, which was a painful integration,” said a senior banker.
If the the deal materialises, it would enable the merged entity to become the dominant bank in Kerala, a significant deposit and remittance market. CSB, with 360 branches, has an over Rs 8,000-crore balance sheet, while Federal Bank with over 606 branches has a Rs 35,000-crore book. Federal Bank, which has been snooping around for an acquisition and even raised Rs 2,000-crore capital in 2008 to buy a bank, is keen to move fast on the deal.
Dear Prem,
ReplyDeleteYour comments are well researched and thoughtful, I am sure this blog will give many people who are looking for guidence on investing in CSB shares some idea on the worthfulness of such an investment. I do agree with you on your idea of investment funds floated by our dioceses buying the shares, that could be the ideal solution........
warm regards
Biju John
+974 5879028