Capital Small Finance Bank

Stock Opportunities Untested - but worth a good look
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Capital Small Finance Bank is a well known bank in Punjab. In 2016 it was a local area bank having its business in two three districts in Punjab only has came a long way after being converted to small finance bank from a local area bank. Currently It is operating in Punjab, Haryana, J&K , Himachal Pradesh, Rajasthan, Chandigarh and NCR region.
In this forum I will try to analyze CSFB.

Key Figures ( Taking in consideration figures of Q3 2025) -
Gross advances - Rs. 6816 crores (up 19% YoY)
Total Deposits - Rs Rs. 8384 Crores ( up 12% YoY)
Gross NPA - 2.67 %
Net NPA - 1.35 %
PAT - Rs 34 Crores (up 18% YoY).

Now I would like to discuss about some factors which can prove growth drivers for the bank -

  1. Currently bank has majority of branches in Punjab only. If the bank is able to open it’s branches in other states aggressively it can show robust growth.
  2. As per there presentation they have zero direct microfinance exposure.
  3. If bank secures universal bank license, it can significantly enhance its branch network.

Following can be the challenges faced by the bank -

  1. The branches of the bank is majorly concentrated in Punjab only and major proportion of their loan portfolio consists of loan to agricultural sector (32% of total advances). Any political risk can hinder its growth.
  2. The bank (which is concentrating more on semi urban/ rural areas) is facing huge competition from major commercial/small finance banks as well as other NBFCs which are expanding aggressively in semi urban and rural areas.
  3. RBI is keeping strict norms for small finance banks. Bank can face difficulties to comply for the license requirements to get universal banking license.

Outlook on current valuation -

  1. The ipo was issued in February 2025. The current price is well below its listing price.
  2. The PE ratio is around 10 and PEG ratio is around 0.24. As compared to another small finance banks and industry average the figures of the bank are on lower side.

Capital small finance bank is small cap stock having market cap of around 1300 crores. It is one of the fast growing small finance banks in India having strong balance sheet, good performance QoQ as well as Yoy and aggressive expansion plans. Although there many risks associated with this bank still it is worth analyzing further.

Would like to hear further insight on this stock.

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I think among small finance banks this one is better placed as it has almost all of the book as secured book.
The biggest disadvantage is its presense concentration in punjab. Also their growth is very low as compared to private banks and their ability to compete with other banks private banks is what will decide its wealth creation capablity. Also the promoters and managenent is what dufferenciates any company and especially for a bank. A good company in terms of secured assets and stablity, with sub par growth and very less future vision outside punjab makes it, not the first choice to invest for me.

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