South Indian Bank is offering its shares at 63.77 per cent of its book value of Rs 50.18 as on March 31, 1998. On an equity base of Rs 19.37 crore, the earnings per share (EPS) for fiscal 1998 works out to Rs 10.47 and this discounts the offer price by a multiple of only 3.05. However, on the post-issue capital of Rs 35.28 crore, the EPS works out to Rs 5.89 which discounts the offer price by 5.72 times. The bank is tapping the public to meet its long-term capital requirements. The bank currently has a capital adequacy ratio of 9.4 per cent as on March 31, 1998, against the mandatory 8 per cent.

With 354 branches and 54 extension counters, the bank is predominantly present in Kerala (215 branches) and Tamil Nadu (89 branches). In the other two states of south India, Karnataka and AndhraPradesh, the bank has 15 and 9 branches, respectively. Of the total branches, 258 branches are located in rural and semi-urban areas.

The bank has a well-diversified loan portfolio with maximum exposure to any industry limited to 8.28 per cent. As on March 31, 1998, the industrial advance of the bank constituted 35.88 per cent, which is low. During fiscal 1998, the bank has more than doubled its net profit to Rs 20.74 crore against Rs 7.77 crore in 1997. Total income rose to Rs 364 crore against Rs 301 crore in 1997. During the year, advances saw a growth of 26.78 per cent to Rs 1,463 crore and deposits went up by Rs 641.68 crore (30 per cent) to Rs 2,738.27 crore. The shares will be listed at Cochin, Bombay and National stock exchanges.

A private sector bank, the offer price of Rs 32 is close to City Union Bank's recent public offer at Rs 35 and higher than Jammu and Kashmir Bank's issue price of Rs 28. In terms of number of branches and operations, South Indian Bank has an edge over the other two bankswhich received an overwhelming response to their issues. However, South Indian Bank has a very high level of non-performing assets (NPA) of 6.16 per cent as on March 31, 1998, perhaps highest among private sector banks in the industry.

In fact, UTI Bank's high NPA level of 5.65 per cent has forced the bank to trim its premium to Rs 11 (just half of South Indian Bank's premium of Rs 22) for its proposed Rs 73-crore public offer.

Importantly, even after receiving a tremendous response from the public for their issues, several banks (public as well as private) in the past have failed to provide exit points for investors on listing. One of the main reasons for the poor performance on bourses has been the high NPA level of these banks. A professionally managed bank, South Indian Bank also has a high level of NPAs (gross NPA 10.26 per cent or Rs 156 crore of the total advances as on March 31, 1998).