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
Economic Times
17 hours ago
- Economic Times
Rekha Jhunjhunwala's portfolio: 4 of 6 new additions outpace Sensex QTD in March quarter
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Rekha Jhunjhunwala's fresh stock picks added in the March 2025 quarter have, on the whole, outpaced the broader market, with four of six additions delivering higher returns than the BSE Sensex's 6.2% quarter-to-date gain. Nazara Technologies has emerged as the biggest gainer, soaring 31%, likely driven by bullish investor sentiment around digital entertainment and gaming. Canara Bank followed with a strong 30% return, reflecting renewed optimism in PSU banking stocks amid improving credit growth and asset quality. Geojit Financial Services also impressed with a 20% return, riding on the surge in market activity and retail participation. Wockhardt, though a modest performer, edged past Sensex with a 6% Tata Motors , a key stock in her portfolio, posted a 5.6% return, slightly underperforming the benchmark, possibly due to mixed earnings performance. Escorts Kubota , however, trailed significantly, delivering a muted 1.4% return despite positive rural common feature of all the above stocks is that she held them in the September quarter and offloaded them in the December Jhunjhunwala's bets reflect a balanced exposure across financials, auto, healthcare, and emerging tech, with select stocks notably outperforming the market to the latest shareholding data compiled by Trendlyne, Jhunjhunwala publicly holds 26 stocks with a net worth of over Rs 41,570.9 changes in her portfolio stocks would reflect after the June of the other stocks held by this celebrity investor include Singer India, Tata Communications, Crisil, Federal Bank, Indian Hotels Company, Jubilant Pharmova, Karur Vysya Bank, NCC and Fortis Healthcare among others.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
Time of India
17 hours ago
- Time of India
Rekha Jhunjhunwala's portfolio: 4 of 6 new additions outpace Sensex QTD in March quarter
Rekha Jhunjhunwala's fresh stock picks added in the March 2025 quarter have, on the whole, outpaced the broader market, with four of six additions delivering higher returns than the BSE Sensex's 6.2% quarter-to-date gain. Nazara Technologies has emerged as the biggest gainer, soaring 31%, likely driven by bullish investor sentiment around digital entertainment and gaming. Canara Bank followed with a strong 30% return, reflecting renewed optimism in PSU banking stocks amid improving credit growth and asset quality. Geojit Financial Services also impressed with a 20% return, riding on the surge in market activity and retail participation. Wockhardt, though a modest performer, edged past Sensex with a 6% gain. Meanwhile, Tata Motors , a key stock in her portfolio, posted a 5.6% return, slightly underperforming the benchmark, possibly due to mixed earnings performance. Escorts Kubota , however, trailed significantly, delivering a muted 1.4% return despite positive rural cues. One common feature of all the above stocks is that she held them in the September quarter and offloaded them in the December quarter. Overall, Jhunjhunwala's bets reflect a balanced exposure across financials, auto, healthcare, and emerging tech, with select stocks notably outperforming the market benchmark. According to the latest shareholding data compiled by Trendlyne, Jhunjhunwala publicly holds 26 stocks with a net worth of over Rs 41,570.9 crore. Any changes in her portfolio stocks would reflect after the June quarter. Some of the other stocks held by this celebrity investor include Singer India, Tata Communications, Crisil, Federal Bank, Indian Hotels Company, Jubilant Pharmova, Karur Vysya Bank, NCC and Fortis Healthcare among others.
Economic Times
a day ago
- Economic Times
In a challenge to peers, Canara Bank waives minimum balance rule
Canara Bank has scrapped the average monthly balance (AMB) requirement across all savings bank accounts in a bid to shore up deposits – an industry-wide challenge amid falling interest rates and growing competition from capital markets. India's fourth-largest public sector bank by assets expects to lose 'a few hundred crores' per year in penalty income due to the move but it hopes the move will encourage customers to shift funds into term or recurring deposits in the long term, executive director S K Majumdar said. 'Perhaps if we don't do this, we will lose deposits,' Majumdar told ET. 'This creates a feel good for the customer. At a time when the industry is facing a challenge of mobilising deposits, especially because capital markets are doing well, this gives customers an alternative,' he added. The waiver, with effect from June 1, is across all savings accounts including salary accounts and NRI accounts. Minimum balance requirements in Canara Bank's savings bank accounts ranged from an average monthly balance of Rs 500 in rural branches to an average quarterly balance of Rs 1 lakh for their savings bank power plus accounts. Failure to maintain these balances resulted in penalties ranging from Rs 25 per month to Rs 60 per day excluding GST, information on the bank's website showed. 'We will lose a few hundred crores by waving these charges, but we hope to recoup these losses through increase in other deposits," Majumdar said. 'We expect others to do it as well as banks need to find ways to garner deposits.' He said the ease with which customers can shift funds to recurring or term deposits from SB accounts due to digital banking could mean that the bank may get inflows into those fixed term Bank's annual presentation shows that the annual service charge fees it collected increased 4% year on year to Rs 3,561 crore in the fiscal ended March 2025 from Rs 3,417 crore a year earlier. The bank does not give a separate number for charges on non-maintenance of balances.
