FAIRFAX GETS RBI NOD TO PICK UP 51% IN CATHOLIC SYRIAN BANK
The Reserve Bank of India has given its nod to Fairfax to acquire a 51 per cent stake in Kerala-based Catholic Syrian Bank (CSB). This is the first takeover of an Indian bank by a foreign non-banking entity since the regulator tweaked the ownership norms in 2017. Fairfax has agreed to infuse ~12 billion into CSB. The capital will increase the bank's book by ~150-200 billion. CSB's Managing Director& Chief Executive Officer CV R Rajendran has confirmed the development and said they expect the money to come in the next few weeks. "We will take it in tranches," said Rajendran, adding that the investor will have two representatives on the Board. TEN AR A SIM HAN writes
Fairfax has received approval from the Reserve Bank of India (RBI), to acquire 51 per cent stake in Kerala-based Catholic Syrian Bank (CSB). This is the first case of an Indian bank being taken over by a foreign non-banking entity since the banking regulator tweaked the ownership norm in May 2017.
Fairfax has agreed to infuse fresh capital worth ~12 billion in CSB for acquiring 51 per cent stake in the bank. The new capital from the investor will increase the bank’s book by ~150-200 billion.
CSB’s managing director and chief executive officer CV R Raj end ran has confirmed the development and said that the bank expects the money to come in the next few weeks.
“We will take it in tranches,” said Rajendran, adding that the new investor will have two representatives on the board.
In May 2017, Fairfax India had discontinued its talks with CSB to acquire 51 per cent stake in the bank. Reportedly, the discussions were discontinued owing to differences over price and valuation.
But later in February 2018, IndoCanadian businessman Prem Watsa decided to pay more than his initial offer in 2017. Justifying the revised offer, Watsa said he was impressed by the management led by Rajendran.
In January, Rajendran reopened the conversation with Fairfax on the back of higher loan recoveries, successful enhancements to the bank’s organisational structure. He indicated that the bank would be open to revised price and valuation.
This indeed proved to be the case, with Fairfax agreeing to invest at ~140 per share, a multiple of 1.1 times of the September 30, 2017 book value per share.
While Rajendran has already brought in several positive changes at the organisation, Watsa believes there is still scope to do more to improve and modernise CSB. The capital that we are infusing will be used to improve its CAR and drive the necessary changes, said Watsa earlier.
CSB has reported a loss of ~974.7 million in 2017-2018 as against a profit of ~15.5 million in 2016-17 and loss of ~1.49 billion in 2015-16.
Rajendran attributed the loss largely to increase in non-performing assets in the backdrop of the state government’s decision to waive off education loans, and on account of distress in cashew industry. He said CSB would witness a turnaround in 2018-19.