Bandhan Bank IPO: Brokerage Views & Run up to IPO

Bandhan Bank
This post on Bandhan Bank IPO tries to bring out consolidated brokerage views , Grey Market Premium, Subscription information. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Bandhan Bank IPO or not.

Related Posts:   (Coming Soon)
Subscription: Bandhan Bank IPO  ( x times)
  QIB NII Retail Total
Day 3  38.67   13.89 1.2 14.63
Day 2   2.33   0.24 0.33 0.88
Day 1    1.14 0   0.03  0.34
Bandhan Bank IPO: Grey Market Premium etc.

19/03/18 Grey Market Premium Rs.  18-20/-  
15/03/18 Grey Market Premium Rs.  15/-  kostak: Rs. 450-500
14/03/18 Grey Market Premium Rs.  25/-  kostak: Rs. 650-700

Anchor Investors

Anchor Investors (AIs) portion in the Public Issue of Bandhan Bank  Limited 35,784,147 equity shares have been subscribed today by 65 AIs at Rs. 375/- per equity share.  Amansa Holdings, ICICI Prudential, Neuberger Berman, Nomura Fund , HDFC Standard Life, Birla Sun Life, Citigroup, Aberdeen, SBI Life and Kotak Mahindra are some of the Anchor Investors.
Click here for Complete Bandhan Bank Anchor Investors List

Consolidated opinion of Brokerages, Analysts, Business New Paper Reports, Management Views on Bandhan Bank IPO .

Angel Broking: “At upper end of the IPO price band, Bandhan is valued at 8.3x 3QFY18 book value (pre- IPO) and on Post dilution basis at 5x of BV. Though valuations are on the higher side, we expect such premium valuations to persist given (a) healthy return ratio (25%+ RoE for FY17 and 9MFY18), (b) balance sheet strength (24.8% CAR ratio, CASA – 33.2%) and (c) experienced and focused management. Considering the above positives, we recommend SUBSCRIBE on the issue.”

Capital Market: ” Score 46/100, Bandhan Bank’s EPS for 9M of FY2018 on post-issue equity works out to Rs 10.7. At the price band of Rs 370 to Rs 375, P/E works out to 34.6 to 35.0 times. Post-issue book value of Bandhan Bank works out to Rs 75.6 at the issue price of 370 and Rs 76.0 at the issue price of Rs 375. P/BV works out to 4.9X and P/Adj BV is at 5.0x at the upper price band. Among the comparable banks, RBL Bank is trading at P/BV (on 9M FY2018 BV) of 3.0X, AU Small Finance Bank is trading at P/BV of 8.4X, Yes Bank is trading at P/BV of 2.8X, Indusind Bank is trading at P/BV of 4.4X. “

Choice Broking: BBL is demanding valuation of Rs4,47,301.9 mn valued at P/ABV at 4.9(x) to FY18 annualized adjusted BVPS, making it the 7th most valuable lender. Valuation is expensive compared to RBL Bank at 3.2x, Federal Bank at 1.7x and even higher to well managed banks like Yes Bank at 3.2x, Indusind Bank at 4.8x. Considering all these factors, we are of the view that the issue is aggressively priced factoring all fundamental positives and leaving limited space for further upside. Thus, we assign ‘Subscribe with Caution’ rating to the issue. .”

GEPL Capital: “Bandhan Bank Limited stands to gain from operating leverage. At a P/B of 7.6xs of FY18 (9 mnth) BV. We believe that Bandhan Bank Limited has a niche play in micro financing and strong growth metrics which will make them lucrative. We assign a Subscribe rating to the IPO.”

HEM Securities: “The Bank is bringing the issue at p/b multiple of 4.9-4.93 on post issue book value at price band of Rs 370-375/share. Bank with its operating model focused on serving underbanked and underpenetrated markets has consistent track record of growing a quality asset and liability franchise with extensive, low cost distribution network & customer-centric approach and experienced and professional team, backed by strong independent board. Hence, we recommend “Subscribe” on issue.”

Nirmal Bang: “Given Bandhan’s strong presence in niche customer segments, formidable liability franchisee and capable management; its profitability will be superior to conventional banks and NBFCs. The bank’s focus on under penetrated regions and new products will ensure that its strong loan book growth continues in future (Loan growth of 41% as on Q3FY18). Further, its relentless focus on cost will enable BBL to generate industry leading RoA/RoE in the long run (annualized pre IPO RoA/RoE of 3.8%/23.6% for 9MFY18). BBL is being offered at P/ABV of 5.0x & P/E of 35.0x on post diluted basis leaving reasonable scope for appreciation for investors and thus we recommend subscribing to the issue.”

Religare:With expected revival in credit growth, receding impact of demonetization and GST, Bandhan is well placed to capitalize on capturing the unbanked segment largely in micro finance space. Also with banking license, Bandhan will also be able to reduce its overall cost of funds. Further, Bandhan is focusing on boosting its non-interest income through distribution of insurance products. It also plans to maintain focus on micro lending while expanding further into other retail and SME lending. The bank has delivered robust financials with net interest margin at 9.9%, Net interest income at Rs. 2,169 cr and net profit at Rs. 958 cr. Bandhan also has healthy asset quality with Gross NPA at 1.59% and Net NPA at 0.8%. On the valuations front, Bandhan is priced at a premium with 4.7x FY18E post issue adjusted Book Value.”

SMC : “Rating 2.5/5 Considering the P/E valuation on the upper end of the price band of Rs. 375, the stock is priced at pre issue P/E of 32.16x on its estimated annualised FY18 EPS of Rs. 11.66. Post issue, the stock is priced at a P/E of 35.03x on its EPS of Rs. 10.71. Looking at the P/B ratio at Rs. 375 the stock is priced at P/B ratio of 9.24x on the pre issue book value of Rs.40.60 and on the post issue book value of Rs. 70.66 the P/B comes out to 5.31x.”

SPA Securities: “BBL’s ability to improve its scale of operation along with profitability with every successive transition is admirable. It has evolved from an NGO to a MFI and now a universal bank. Their focus on serving the underserved, consistent track record of growing a quality asset and relentless focus on cost control has resulted in healthy return ratio of ~4% / ~25% ROA / ROE for 9M FY18. We expect higher opex cost and spreads to widen as it evolves into a universal bank from an MFI. At upper price band of INR 375, the issue is priced at 4.9x P/BV 9M FY18 post dilution. Considering the superior track record of the company (~42% CAGR since FY16, ~0.5% GNPA, ~38% CAR post dilution & 33% CASA), we believe the issue is fairly valued. However, deployment of the fresh proceeds in a similar way going ahead remains a key risk. We recommend SUBSCRIBE to the issue.”

SP Tulsiyan website: “Since Bandhan is yet to establish a track record and prove its ability to diversify as scale of operations enlarge, one must wait for an attractive price point. Meanwhile, due to the market meltdown, more established and larger banks are available at much attractive valuations. Hence, citing expensive valuations and declining sheen of BFSI sector in the secondary markets, one is advised to skip the IPO for now and review the stock post listing.

SSJ Finance: “BBL has grown at a rapid pace in last few years by rapidly increases its network. We believe that robust growth trajectory does merit premium valuations but maintaining asset quality may be a challenge. At the upper end of issue price of Rs 375 per share the bank is priced at 7.9x 9MFY18 Adjusted book value and PE of 32.2x 9MFY18 EPS. We believe issue is fairly priced and hence, recommend investors to subscribe to the issue.” 

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