RBI asks CSB to sort out valuation issue with Fairfax
MUMBAI: The Reserve Bank of India has asked Catholic Syrian Bank (CSB) to iron out differences over valuation with Prem Watsa’s Fairfax Financial Holdings before looking at other investors, according to two people aware of the matter.
Earlier on Tuesday, Bloomberg had reported that private equity investors such as Aion Capital Partners and Everstone Capital have expressed interest to pick up stake in the south-India based private sector lender.
CSB and RBI spokespeople did not respond to emails seeking comment.
Canada-based Fairfax had won RBI’s approval to buy a 51% stake in CSB in December, setting the stage for the first such instance of a bank’s takeover by a non-banking financial entity.
Following this, CSB appointed an external agency for valuing itself. According to the Bloomberg report, this agency valued the bank at about ₹165 to ₹200 per share, plus a control premium of at least 15%.
There is a benchmark too. On May 23, Enam group chairman Vallabh Bhansali had picked up a nearly 4% stake in the bank at ₹160 per share, the first person said. That is a 30% premium to CSB’s ₹123.5 a share book value at the end of March. This values the bank at around ₹1,295 crore.
However, this is far higher than the valuation assigned by Fairfax, which had arrived at its estimate after taking into consideration CSB’s performance six months ago, said the second person cited earlier.
Fairfax’s reluctance to pay a premium could also do with the fact that RBI rules caps voting rights in a private sector bank at 15%, irrespective of shareholding. The regulator has called for a meeting with the Catholic Syrian Bank this week to discuss these issues.