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Published on 14/03/2018 3:57:50 PM | Source: Religare Securities Ltd

IPO Note - Bandhan Bank Ltd - Religare Sec

About the Company

Incorporated in 2014, Bandhan Bank Limited (Bandhan) is a Kolkata based commercial bank focused on micro banking and general banking services. It has license to provide banking services pan-India across customer segments. 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. With a network of 2,633 doorstep service centres (DSCs) and 9.86mn micro loan customers, the bank has strong hold in microfinance. It has 887 bank branches and 430 ATMs serving over 2.13mn general banking customers. Bandhan’s distribution network is particularly strong in East and Northeast India, with West Bengal, Assam and Bihar accounting for 56.4% and 57.6% of its branches and DSCs. In addition to its loan and deposit products, it also offers other banking products and services to generate non-interest income and caters towards the additional needs of customers. These products and services include debit cards, internet banking, mobile banking, EDC-POS terminals, online bill payment services and the distribution of third-party general insurance products and mutual fund products.

Objects of the Issue

* Fresh Issue The object of the fresh issue is to augment Bank's Tier-I capital base to meet Bank's future capital requirements.

* Offer for Sale The Selling Shareholders will be entitled to the respective portion of the proceeds of the Offer for Sale.

Valuation

Being a new commercial bank, Bandhan’s strength lies in its micro finance business which includes a network of 2,633 DSCs and 9.86 million micro loan customers currently. Post obtaining the banking license in 2015 the company has focused particularly on creating a strong general banking business . It currently has 887 bank branches and 430 ATMs, together serving over 2.13 million general banking customers.

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.

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