Is it wise to buy Canara Bank shares ahead of Canara Robeco IPO launch? EXPLAINED
Canara Robeco IPO: Canara Robeco Asset Management Company, the mutual fund arm of state-run lender Canara Bank, has filed draft papers for its initial public offering (IPO) with the capital markets regulator Securities & Exchange Board of India (SEBI).
Canara Robeco IPO will be completely an offer for sale (OFS) of 4.98 crore equity shares by promoters with no fresh issue component, according to the Draft Red Herring Prospectus (DRHP).
Under the OFS, Canara Bank is set to divest 2.59 crore equity shares, while ORIX Corporation Europe N.V. (formerly known as Robeco Groep N.V.) plans to sell 2.39 crore shares.
Canara Bank possesses a 51% interest in Canara Robeco Asset Management Company, whereas Orix Corporation controls the rest of the ownership in the AMC.
Since the IPO is entirely an OFS, the company will not receive any funds from the public issue, and the proceeds will go to the selling shareholders.
Canara Robeco IPO is estimated to be around ₹ 800-1,000 crore, according to media reports and talks on Dalal Street. As Canara Bank is selling around 52% of the OFS shares, the lender is estimated to receive approximately ₹ 500 crore from the public issue.
Additionally, Canara HSBC Life Insurance Company has also filed a DRHP with SEBI for an IPO, which is again entirely an OFS.
The OFS includes up to 13,77,50,000 shares by Canara Bank, up to 47.50 lakh shares by HSBC Insurance (Asia-Pacific) Holdings Limited, and up to 9.50 crore shares by Punjab National Bank.
The IPO could be valued around ₹ 16,500 crore, with Canara Bank expected to raise approximately ₹ 2,200 crore from its stake sale, according to Vaibhav Vidwani, Research Analyst at Bonanza Group.
Experts debate if investing in Canara Bank shares ahead of Canara Robeco IPO would be a tactical decision or not.
Seema Srivastava, Senior Research Analyst at SMC Global Securities explained that investing in Canara Bank shares ahead of the Canara Robeco AMC IPO could be a strategic move, given the bank's stake sale in the AMC would lead to raising of significant capital which can be utilise to strengthen the lender's balance sheet.
Canara Robeco IPO, being a 100% OFS, means the Canara Bank will receive the proceeds from the IPO, which will help strengthen its balance sheet and improving its capital adequacy ratio.
'This influx of capital can help Canara Bank expand its lending capacity, invest in growth initiatives, and reduce its dependence on external funding. With a stronger balance sheet, the bank can lower borrowing costs and enhance its overall financial stability,' Srivastava said.
According to her, with its strong fundamentals and growth potential, investing in Canara Bank shares ahead of the Canara Robeco AMC IPO can be a good investment strategy for long-term investors.
'The bank's ability to drive growth initiatives and improve its financial health makes it an attractive investment opportunity. Overall, Canara Bank's stake sale in Canara Robeco AMC is likely to have a positive impact on its balance sheet and growth prospects, making it a good investment option for those looking to invest in the banking sector. By investing in Canara Bank shares, investors can benefit from the bank's strong market presence and growth potential,' added Srivastava.
Meanwhile, Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities said that before considering if investing in Canara Bank shares ahead of Canara Robeco IPO is a wise investment strategy, investors should understand that Canara Bank is trying to monetise its investment in Canara Robeco AMC, and potentially projecting it as an unlocking value for shareholders.
'Given that the parent owns ~51% stake in the AMC business can influence the bank's valuation as a one-time benefit, which can also be discounted in the current price. More upside in the strategy could come depending on many factors like IPO market momentum, peer valuations and overall market sentiments. On the risk part, delay in IPO process due to regulatory approvals can reduce the strategy return expectations,' Tapse said.
As of date, there are four AMC listed stocks for reference on valuations - HDFC AMC, Nippon Life India Asset Management, UTI AMC & Aditya Birla Sun Life AMC - trading in the range as high as 11.5x and as low as 3x, based on price-to-book (P/B) value comparison, he noted.
'Considering the AUM size of Canara Robeco AMC, which is approximately ₹ 1 lakh crore as of FY25, we can assume the IPO price should be in the valuation range of ~3-7x P/BV. However, it is too early to conclude this will be a wise investment strategy,' advised Tapse.
On the technical charts, the trend for Canara Bank shares remains bullish.
"Canara Bank witnessed a breakout from an Inverse Head and Shoulders pattern on 17th April 2025, supported by rising volumes—indicating a potential shift in trend. Post-breakout, the stock is currently experiencing a throwback move, which is a typical retest of the neckline. A bounce is anticipated from the neckline level, which also coincides with the 50 EMA, reinforcing the zone as a strong support area," said Kunal Kamble, Sr. Technical Research Analyst at Bonanza Group.
"The stock is trading above the 50 EMA, a sign of a positive trend, and reflects continued bullish sentiment, he added. Meanwhile, the RSI had entered the overbought zone, triggering some profit booking," Kamble added.
Despite the short-term pullback, the overall trend remains intact as long as the stock sustains above the ₹ 90 level, he opined.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
First Published: 1 May 2025, 01:59 PM IST
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Time of India
a day ago
- Time of India
Stock market update: Nifty Bank index advances 1.22%
NEW DELHI: The Nifty Bank index closed on a positive note on Friday. Shares of Canara Bank(up 2.23 per cent), Federal Bank Ltd.(up 1.77 per cent), HDFC Bank Ltd.(up 1.52 per cent), State Bank of India(up 1.41 per cent) and ICICI Bank Ltd.(up 1.12 per cent) ended the day as top gainers in the pack. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Sudoku That Feels Like Pen & Paper Classic Sudoku Download Undo On the other hand, finished as the top losers of the day. The Nifty Bank index closed 1.22 per cent up at 56252.85. Benchmark NSE Nifty50 index ended up 319.16 points at 25112.4, while the BSE Sensex stood up 1046.3 points at 82408.17. Live Events Among the 50 stocks in the Nifty index, 46 ended in the green, while 4 closed in the red. Shares of Vodafone Idea , RattanIndia Power , Vishal Mega Mart , Suzlon Energy and YES Bank were among the most traded shares on the NSE. Shares of Quality Power Electr , Prostarm Info System , Gallantt Metal , Gillanders Arbuthnot & Co and Indiabulls Enterprises hit their fresh 52-week highs in today's trade, while Navkar Builders , Sadhana Nitro, Lasa Supergenerics, Siemens Energy India and Chembond Chem hit their fresh 52-week lows.
&w=3840&q=100)
Business Standard
a day ago
- Business Standard
HDFC Bank may pocket ₹9,373-cr profit from HDB Financial Services IPO
HDB Financial Services IPO: India's largest private sector lender, HDFC Bank, is set to gain a whopping ₹9,373 crore profit from the Initial Public Offering (IPO) of its non-banking financial company (NBFC) arm, HDB Financial Services, scheduled to open on June 25, 2025. Notably, the HDB Financial Services IPO is slated to be the largest public offering in India's NBFC sector. That said, the Red Herring Prospectus (RHP) filed by the company reveals that the offering comprises a fresh equity issuance worth ₹2,500 crore, alongside an offer for sale (OFS) in which HDFC Bank will divest part of its stake (135.13 million equity shares) valued at ₹10,000 crore. The price band for the HDB Financial Services IPO has been set between ₹700 and ₹740 per share. If the public issue is fully subscribed at the upper end of the range, HDFC Bank stands to raise ₹10,000 crore from the OFS. Meanwhile, HDFC Bank's average acquisition cost for the shares is ₹46.4 per share, bringing the total acquisition cost for the OFS shares to approximately ₹627 crore, according to the RHP. Thus, the transaction is expected to generate a profit of approximately ₹9,373 crore for HDFC Bank, including payable taxes, if applicable. Currently, HDFC Bank holds a 94.3 per cent stake in HDB Financial Services, which is anticipated to reduce to around 70 per cent post-IPO. Despite the reduction in ownership, HDB Financial Services will remain a subsidiary of HDFC Bank. HDB Financial Services IPO details The public offering of HDB Financial Services will remain available for subscription from Wednesday, June 25 - Friday, June 27. HDB Financial Services has set the price band ₹700-740 per share, with a lot size of 20 shares. A retail investor would require ₹14,800 to bid for one lot or 20 shares of HDB Financial Services IPO. Meanwhile, for a maximum bid of under ₹200,000, retail investors can bid for 260 shares, or 13 lots, in this IPO. HDB Financial Services IPO grey market premium (GMP) today The unlisted shares of HDB Financial Services are commanding a solid premium in the grey markets on Friday. According to sources tracking unofficial market activities, the unlisted shares of HDB Financial Services were trading at ₹840 per share, reflecting a grey market premium of ₹100 or 13.51 percent over the upper end of the issue price. HDB Financial Services IPO allotment date, listing date Following the closure of the subscription window, the basis of allotment of HDB Financial Services IPO shares is expected to be finalized on Monday, June 30. The successful allottees will receive the company's shares in their demat accounts on Tuesday, July 1. Shares of HDB Financial Services are slated to make their D-Street debut by listing at BSE and NSE tentatively on Wednesday, July 2. About HDB Financial Services HDB Financial Services, a subsidiary of HDFC Bank, is one of the leading, diversified retail-focused NBFCs in India in terms of Total Gross Loan Book size, according to the CRISIL Report. Classified as an Upper Layer NBFC (NBFC-UL) by the Reserve Bank of India (RBI), the company operates through three key business verticals—Enterprise Lending, Asset Finance, and Consumer Finance. HDB Financial Services also provides business process outsourcing services, including back-office support, collections, and sales support services to its promoter.
Time of India
2 days ago
- Time of India
Capillary Technologies files IPO papers; aims to raise Rs 430 crore
Capillary Technologies India has filed for an IPO comprising a Rs 430 crore fresh issue and an OFS of 1.83 crore shares. Funds will support cloud infrastructure, R&D, and acquisitions. Those selling shares in the OFS include Capillary Technologies International Pte Ltd, Ronal Holdings LLC, Trudy Holdings, and Filter Capital India Fund I. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads SaaS firm Capillary Technologies India has filed preliminary papers with markets regulator Sebi to seek approval to raise funds through an initial public offering (IPO).The IPO comprises a fresh issue of shares worth Rs 430 crore and an offer for sale (OFS) of 1.83 crore shares by existing shareholders, according to the draft red herring prospectus (DRHP) on selling shares in the OFS include Capillary Technologies International Pte Ltd, Ronal Holdings LLC, Trudy Holdings, and Filter Capital India Fund from its fresh issuance worth Rs 120 crore will be utilised for funding the company's cloud infrastructure cost; Rs 151.54 crore for investment in research, designing, and development of its products and platform; and Rs 10.32 crore for investment in the purchase of computer systems for its proceeds will be used for funding inorganic growth through unidentified acquisitions and general corporate in December 2021, the company had filed its IPO papers with Sebi. However, it did not get the Technologies India offers artificial intelligence (AI)-based cloud-native Software-as-a-Service (SaaS) products and solutions primarily to enterprise in India, Capillary has a significant global footprint with offices in locations across the US, the UK, the UAE, and other Asian countries. It supports over 390 brands in more than 45 countries, as of March 31, the financial front, Capillary Technologies' revenue from operations increased by 14% to Rs 598 crore in the fiscal 2025 from Rs 525 crore in the preceding company has turned profitable in fiscal 2025, with Rs 13.28 crore profit against a loss of Rs 59.38 crore in FY24. IIFL Capital Services , Nomura Financial Advisory and Securities (India) Private Ltd are the book-running lead managers of the issue. The equity shares are proposed to be listed on the NSE and BSE. PTI
