CSB will raise equity to allow Fairfax on board

Kerala-based Catholic Syrian Bank (CSB) has decided to increase its equity base, creating 80 million shares allowing Canada-based Fairfax to invest up to ~12 billion for a 51 per cent stake.

Experts said the valuation of about ~23 billion for all the equity of CSB is about 10 per cent of total business size. The money will be infused by FIH Mauritius Investment, a subsidiary of Fairfax India Holdings.

The deal, if it fructifies, will mark the first takeover of an Indian bank by a foreign nonbanking financial entity after the RBI changed ownership norms in May last year.

The bank proposes to offer, issue and allot up to 86,295,459 equity shares and/or warrants, on a preferential basis, to FIH Mauritius. at ~140 per equity share, that is at a premium of ~130 per equity share .

In December 2016, the Reserve Bank of India (RBI) gave its approval to FIH Mauritius’ proposal, but the deal did not go through due to valuation issue. Fairfax had revised its proposal that was approved by the bank’s board on February 18.

The lender has called for an extraordinary general meeting of shareholders next month to get nod for the proposal.

The bank said the move would augment the bank’s tier-I capital base to meet future capital adequacy requirements.

The board believes that the strategic alliance with FIH Mauritius Investment, belonging to Fairfax India and the broader Fairfax Financial group that has a significant expertise in the banking and financial space, can be beneficial for the bank’s strategy and governance.

It can also offer opportunities to explore synergies with other institutions in the space.