Bandhan Bank IPO: Things to know about India’s biggest bank issue

Kolkata-based private sector lender Bandhan Bank yesterday raised Rs 1,342 crore from anchor investors, ahead of its initial share-sale today. It has allotted 3,57,84,147 shares to 65 anchor investors at a price of Rs 375 per scrip, garnering Rs 1,341.91 crore, the lender said in a statement. The price band for the initial public offer (IPO), which will close on March 19, has been fixed at Rs 370-375 per equity share. The issue is expected to raise Rs 4,473 crore.

The bank primarily focuses on serving underbanked and underpenetrated markets in India. Here is all that you must know about the issue and the private lender:

Bank profile

The Bank began its operations on August 23, 2015, when Bandhan Financial Services Limited (BFSL), its parent company, transferred the entire microfinance business to Bandhan Bank. The Bank’s strength lies in microfinance, which includes a network of 2,022 doorstep service centre (DSCs). Bandhan Bank’s distribution network is particularly strong in East and Northeast India, with West Bengal, Assam and Bihar together accounting for 56.37 percent and 57.58 percent of branches and DSCs as of December 31, 2017, respectively.

Objects of the issue

As per the Bandhan Bank’s IPO prospectus, the objectives of the initial public offer include achieving benefits of listing equity shares on stock exchanges and to meet Reserve Bank of India’s licensing guideline. To note, according to the RBI guidelines, Bank’s shares must get listed on the stock exchanges within three years from the date of commencement of business i.e, on or before August 22, 2018. Further, Bank seeks to augment its Tier-I capital base to meet the future capital requirements.

About the Issue

The bank has put on offer up to 11,92,80,494 equity shares, including fresh issue of up to 9,76,63,910 equity shares. The IPO also consists of an offer for sale of up to 1,40,50,780 equity shares by IFC and up to 75,65,804 equity shares by IFC FIG. Bids can be made for a minimum lot of 40 shares and in multiples of 40 shares thereafter. The issue will close on March 19. Bank’s IPO comprises fresh issue of up to 9,76,63,910 equity shares and an offer for sale of up to 1,40,50,780 scrips by International Finance Corporation (IFC) and up to 75,65,804 shares by IFC FIG Investment Company. The equity shares are proposed to be listed on BSE and NSE.

Investors

Among the anchor investors are Abu Dhabi Investment Authority – Behave, Blackrock India Equities (Mauritius), HSBC Indian Equity Mother Fund, UTI – Mastershare Unit Scheme, BNP Paribas Arbitrage, Amansa Holdings and Tata Balanced Fund.

Strengths

  1. Bandhan Bank focuses specifically on serving underbanked and underpenetrated markets, 29.15 percent of its banking outlets were located in unbanked rural areas and 96.49 percent of gross advances were PSL compliant, each as of December 31, 2017.
  2. Its management team has a strong track record and significant experience in the microfinance and banking industries.
  3. Its mission is to provide customers accessible, simple, cost-effective and innovative financial solutions in a courteous and responsible manner.
  4. Since its inception, it has consistently delivered financial results for shareholders and are currently in a robust financial position.

Risks

There are no key risks in Bandhan Bank. The company has an unsecured portfolio, it primarily focuses in under-banked areas, its business involves lending to high-risk borrowers. And hence, any default from the customers could negatively impact its business. It has limited historical track record and relatively less experience in banking sector.

Bandhan Bank is the first instance in India when a micro-finance entity is transforming into a universal bank. In April 2014, the Reserve Bank of India (RBI) had granted banking license to Bandhan Financial Services as well as IDFC.

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