Bandhan Bank
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.

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