Bandhan Bank IPO comprises of fresh issue worth of Rs. 3,662cr and OFS worth Rs. 810 cr. International Finance Corporation and IFC FIG Investment Company are making a partial exit through the OFS.
Bandhan Bank IPO Details:
| Issue Period | Thur, March 15, 2018- Mon, March 19, 2018 |
| Issue Details | Fresh Issue of 97,663,910 Equity Shares |
| + Offer for Sale of 21,616,584 Equity Shares | |
| Issue Size (No. of Shares) | 15,436,144 Equity Shares |
| Issue Size (Rs. Cr) | 4473 crore |
| Price Band | Rs.370 – 375 |
| Bid Lot | 40 Equity Shares and multiple thereof |
| Issue Structure : | |
| QIB | 50% of the offer |
| NIB | 15% of the offer |
| Retail | 17,892,075 Equity Shares -671Cr |
| Appls Required for 1x | 10,43,704.00 |
| BRLMs | Axis Capital, Kotak Mahindra Capital, Goldman Sach, JM Financial, J P Morgan |
| Registrar | Karvy Computershare |
About Bandhan Bank
- Bandhan Bank Ltd has its roots in 2001 when an non government organisation (NGO) named Bandhan Konnagar was formed to provide microfinance services to socially and economically disadvantaged women in rural West Bengal.
- Incorporated on 23 December 2014, Bandhan Bank Limited (“Bandhan”) a commercial bank focused on serving under banked and under penetrated markets in India. Bandhan offers a variety of asset and liability products and services designed for micro banking and general banking, as well as other banking products and services to generate non-interest income.
- Bandhan Bank’s has 887 bank branches, 430 ATMs serving 21 lakh customers)and 2,633 doorstep service centres (DSCs) serving 99 lakh micro
- Bandhan Bank is concentrated in East and North East India, with West Bengal, Assam and Bihar – together accounting for 57% of branches and DSCs.
Bandhan Bank: Financials
| Rs. In Crore | ||||
| Fy18(9m) | Fy17(9m) | FY17 | FY16 | |
| Interest Earned | 3,451.70 | 2,830.37 | 3,908.71 | 1,581.36 |
| Revenue Growth (%) | 21.95% | – | 147.17% | – |
| Deposits | 25,293.96 | 19,463.31 | 23,228.66 | 12,088.75 |
| Advances Net | 22,930.75 | 16,222.56 | 16,839.08 | 12,437.55 |
| Profit Before Tax | 1,461.18 | 1,210.83 | 1,704.47 | 413.51 |
| Profit after Tax | 957.7 | 789.54 | 1,111.95 | 275.25 |
| NPM % | 27.75% | 27.90% | 28.45% | 17.41% |
| Share Capital | 1,095.14 | 1,095.14 | 1,095.14 | 1,095.14 |
| Reserves | 4,309.01 | 3,028.90 | 3,351.31 | 2,239.36 |
| Net worth | 5,404.15 | 4,124.04 | 4,446.46 | 3,334.50 |
| RONW(%) | 17.72%^ | 19.14%^ | 25.01% | 8.25% |
| NIM | 9.86% | 10.34% | 10.44% | 11.02% |
| ROE | 25.55% | 27.88% | 28.51% | 15.96% |
| ROA | 4.07% | 4.39% | 4.47% | 3.07% |
| EPS (Rs.) | 8.74 | 7.21 | 10.15 | 3.4 |
| Net Asset Value (Rs.) | 49.35 | 37.66 | 40.6 | 30.45 |
| NAV Post Issue | 75.6 | |||
| Face Value | 10 | |||
| IPO Price | 375 | |||
| Post Issue Equity | 1192.8 | |||
| Price/BV(post Issue) | 4.96 | |||
| EPS (Post IPO) | 10.71 | |||
| PE (post IPO) | 35.03 | |||
| Market Cap | 44730.00 | crore | ||
| Market cap / Sales | 11.85 | |||
Bandhan Bank: Other Ratios
| Ratio/Year | FY16 | FY17 | 9MFY18 |
| NIMS (Net interest margin) | 4.9 | 11.4 | 10.7 |
| ROA (return on Assets) | 1.4 | 4.4 | 4.3 |
| ROE (Return on Equity) | 14.4 | 28.6 | 26.8 |
| Cost to Income | 57 | 36 | 35.4 |
| CASA Ratio | 22 | 29 | 33 |
| Gross NPAs | 0.2 | 0.5 | 1.7 |
| Net NPAs | 0.1 | 0.4 | 0.8 |
| CAR (Capital Adequacy Ratio) | 29 | 26.4 | 24.9 |
Rationale for Investment
- Bank’s strength lies in micro finance, including a network of 2,633 Doorstep Service Centers (“DSCs”) and 9.86 million micro loan customers as of December 31, 2017.
- Bandhan Bank launched its general banking business on August 23, 2015 by opening a Greenfield network of 501 bank branches and 50 automated teller machines (“ATMs”), which as of December 31, 2017 has grown to 887 bank branches and 430 ATMs, together serving over 2.13 million general banking
customers. - Bandhan Banks distribution network is particularly strong in East and Northeast India, with West Bengal, Assam and Bihar together accounting for 56.37% and 57.58% of its branches and DSCs, respectively,
- Bandhan Bank has built a strong base of Current Account and Savings
Account deposits, which together stood at Rs.8,401.85 crore as of December
31, 2017, a CASA ratio of 33.22%. - Bandhan Bank retail-to-total deposit ratio stood at 85.07% as on December 31,2017
- Bandhan Bank has developed an 1Extensive, Low Cost Distribution Network
Risks
- Bandhan Bank’s operations involve transactions with high risk borrowers i.e. in unsecured Loan segment.
- Bandhan Bank has limited historical track record
- Maintaining this profitability may be difficult as the Bank scales up its operations
Bandhan Bank IPO: Assessment
- Bandhan Bank has built a strong base of Current Account and Savings Account deposits, which together stood at Rs.8,401.85 crore and a CASA ratio of 33.22% as on as of December 31, 2017.
- On post-issue equity, Bandhan Bank’s P/E works out to be 35.0 times.
- Post-issue book value of Bandhan Bank works out to be 4.9X
- Even as the issue may be leaving nothing at table for investors, Bandhan Bank bank has a unique business model and has so far done quite well.
- Despite stiff valuations, I am likely to apply in Bandhan Bank IPO.
- 19/3/18: 12:40 Hrs: Applied in Bandhan Bank IPO.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.