Bandhan Bank IPO Review

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Bandhan Bank IPO

7.3

Company Background

7.0/10

Price Band

6.5/10

Company Financials

8.0/10

Industry Situation

8.0/10

Reliability

7.0/10

Pros

  • Multiple Banking Services Offered
  • Well established presence
  • Low competition in Micro lending
  • Profitable Bank

Cons

  • Heavy Reliance on Micro Lending, that has risks
  • High Dependency on Eastern Geography of India
  • Its a Competitive Banking Space
IPO Name Bandhan Bank IPO Newgen Software Technologies Limited IPO
Opening Date 15th March, 2018
Shares Issue Size 119,280,494 (97,663,910 fresh Issue) 97,663,910
Face Value ₹10
IPO Price Band ₹370 - ₹375
Bid Lot 40
Total Bid Amount ₹14,800 - 15,000
Listing At NSE, BSE
Retail Allocation 35%
Estimated IPO Size ₹4,470 Crore
Day# No. of Shares Subscribed Shares Subscription %age
Day 1 NA NA
Day 2 NA NA
Day 3 NA NA

 

Bandhan Bank Background

Bandhan Bank is one of the latest entrants into the Indian banking space and was incorporated in June 2015. The bank is based out of Kolkata and in fact, is the only banking company established in the eastern part of India post-1947, the year India got independence.

As far as offline presence is concerned, Bandhan Bank has 893 branches, around 2700 Doorstep service centres (also called DSCs) and 433 Automated Teller Machines (or ATMs). These facilities take care of a customer base of 12 Million which is bifurcated into 2.13 million general banking customers and 9.86 million microloan customers.

Talking about the health of its wealth, Bandhan Bank has a deposit base of ₹27,333 Crore with an outstanding loan book of ₹26,378 Crore. It has an employee base of 27,000+ which can be easily compared with some of the top private banks in the country.

The bank offers services such as Retail loans, Micro-loans, SME loans and small enterprise loans.

Now, Bandhan Bank is coming up with an IPO in this month of March and is looking to raise a capital of ₹4,470 Crore making it one of the biggest IPOs in the history of Indian Stock Market. In fact, it is the largest IPO from the banking industry in India, ever.

With this offer, Bandhan Bank is diluting 10% of its overall stake value. In this detailed review ahead, we will talk about the specifics of this IPO along with peer comparison, pricing points, IPO events followed with our recommendation on Bandhan Bank IPO.

Bandhan Bank Management

Before we jump into the specifics of the Bandhan Bank IPO, let’s check out the top management at the bank who is making all the big decisions.

These decisions include how your invested funds will be used in case you choose to invest in this particular company. Although the company has set its specific objectives on how these funds are going to be utilized (more on that later), but at the end of the day, its the responsibility of the top management to see through those ideas and objectives getting implemented practically.

Here is a quick glimpse at some of the top management executives from Bandhan Bank:

 

 

Bandhan Bank IPO Data Points

As mentioned above, Bandhan Bank IPO opens up for retail bidding on 15th March 2018 and will be open for bidding for 3 business days until 19th March 2018. The overall issue size is in the range of ₹4,470 Crore which basically converts to around 10% equity of the company.

This values the company at a staggering ₹44,700 Crore.

This all looks good, but at the same time, this kind of valuation puts it at a higher price than the other much-established banking brands such as HDFC Bank, Kotak Mahindra Bank etc.

With this IPO, Bandhan bank is looking to open up 97,663,910 equity shares with a face value of ₹10 while the IPO price band is kept at ₹370 to ₹375. If you are looking to place a bid, then you need to bid for at least 40 shares in a single bid and then multiple bids of 40 shares each further ahead.

As a retail investor, you have a maximum cap of ₹2 Lakh in your IPO investments with a single Demat account (linked with a single PAN card). Thus, in case you look to subscribe to this IPO at full capacity, you can bid for 520 shares in total (40 shares X (200/15).

This is how the overall equity is currently spread before this Bandhan bank IPO goes to the floors:

  • Bandhan Financial Holdings: 89.76%
  • Caladium Investment: 4.99%
  • IFC: 3.21%
  • IFC FIG: 0.32%

With this IPO, IFC has put out 14,050,780 shares while IFC FIG putting 7,565,804 shares to sell their corresponding stakes in the company.

Bandhan Bank will be finally listed at both NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) once all the IPO events get completed.

This Bandhan Bank IPO is being managed by Kotak Mahindra, Axis Capital, Goldman Sachs, JM Financial and JP Morgan India.

Bandhan Bank Financial Performance

Since Bandhan Bank is a relatively new name in the Indian banking space, thus, we will not be discussing the last 5 years financial performance of the company in this case (like we generally do).

However, let’s quickly discuss some of the quick financial benchmarks it has set for itself since the time it was launched in 2015:

  • Posted a Revenue of ₹1,731.25 Crore for the FY2015-16
  • Posted a Revenue of ₹4,320.20 Crore for the FY2016-17 (150% Up)
  • Posted a Revenue of ₹3,954 Crore for the first three-quarters of FY2017-18

  • Posted a Profit of ₹275.24 Crore for the FY2015-16
  • Posted a Profit of ₹1,111.95 Crore for the FY2016-17 (304% Up)
  • Posted a Profit of ₹960 Crore for the first three-quarters of FY2017-18

Bandhan Bank IPO Metrics

Let’s look at some of the key parameters and compare it with the peers of Bandhan bank to get a 360-degree view:

 

Bandhan Bank IPO Objective

This IPO issue from Bandhan Bank getting launched this year has its strings attached to the new RBI guidelines where the bank was supposed to go public within the first 3 years of its establishment. In other words, Bandhan band did not necessarily need to go public with this issue if it was not for this guideline from the Reserve bank.

Nonetheless, the bank proposes to use the net proceeds from the funding towards organic and inorganic growth and expansion in Tier 1 capital base. However, this proposal of IPO funds usage has not been appraised and is completely based on the estimates from the company management.

Furthermore, the bank looks to leverage the brand visibility it is going to get through this IPO, that can invariably help the brand to acquire new customers.

Lastly, the expenses incurred throughout this IPO process are going to be added and adjusted through the IPO funding as well.

Bandhan Bank IPO Events

Event Date
IPO Open Date 15th March, 2018
IPO Close Date 19th March, 2018
Finalization of Basis of Allotment 26th March, 2018
Initiation of Refund 27th March, 2018
Credit of Shares to Demat Accounts 28th March, 2018
Listing on Exchange 29th March, 2018

 

Like mentioned above, the IPO opens on 15th of March and you can bid for 3 days until 19th March 2018. The decision of finalization of stocks to be allocated to specific traders will be done by 26th March 2018.

Unfortunately, if you do not get any lot(s), then either the amount will be unblocked from your bank account (if you used ASBA for IPO) or your amount will be credited back to your trading account by 27th March 2018. However, in case you are allocated with the shares, corresponding stocks will be credited to your demat account by 28th March 2018.

Bandhan Bank will be listed on respective exchanges on 29th March 2018.

Bandhan Bank Contact Information

In case you are looking to reach out to the bank and/or to know more about this public issue, you may choose to contact them through the following communication channels:

Registered Corporate Office:

DN 32
Sector V, Salt Lake
Kolkata 700 091
Tel: (033) 6609 0909
Fax: (033) 6609 0502
Email: investors@bandhanbank.com

Bandhan Bank Recommendation

Before recommending anything, let’s look at both the positives and negatives related to this company and the issue it is coming up with.

Here are some of the positives first:

  • A wide range of banking services for different types of client base, including micro-loans, savings accounts, fixed deposits, current accounts, remittance services, NRI Services.
  • Wide presence through their branches and doorstep services.
  • Low competition in the micro-lending space especially in Eastern and northeastern states.
  • Profitable bank in a very short time since its inception in 2015.

At the same time, there are some associated concerns as well:

  • The bank has its operations densely set up in Eastern and North-eastern regions of India with 65% of their operational presence in these few states. This can work both for and against the bank where it gives high exposure in these regions to the bank but has almost no brand equity in rest of the country.
  • At the same time, the business heavily relies on micro-lending which comes with its own set of risks and limitations (microlending does not require collaterals for example). A bad year in the recovery of these loans can be a heavy set back for the company’s overall business valuation (depending on the number of write-offs and amount of Non-performing assets).
  • Lastly, Indian banking space is one of the most competitive ones with the likes of HDFC, ICICI, Axis, SBI and more. Although the industry is reasonably mature, Bandhan bank is relatively a new face and has not really seen the challenges at PAN India level, yet. Thus, keeping a consistent growth pattern is going to be a challenge for long-term sustainability.

Although it has its share of concerns, Bandhan bank seems to be a good stock for long-term investments, with at least a horizon of 5 years plus. It is a possibility that the stock may fall post its debut in the share market owing to its high book value and thus, we suggest you to buy it through the secondary market itself rather than paying a higher value in the primary market.


* The recommendation is just our viewpoint and you are advised to check with your financial advisory and/or stockbroker before investing any money in this IPO. A Digital Blogger bears no responsibility in such investments and the corresponding profits/losses.

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