IPO NOTE BANDHAN BANK LIMITED

Transcription

1 IPO NOTE BANDHAN BANK LIMITED 12 TH -MARCH-2018 Rating: Issue Summary: Price Band (Rs) Face Value (Rs) 10 Market Lot Rs per share 40 shares Opens 15 th March, 2018 Closes 19 th march, 2018 Issue Size (Rs) 4,473Cr No. of shares pre-issue 1,095,141,034 No. of shares post issue 1,192,804,950 Listing Issue Break Up: NSE & BSE QIB Portion 50% NIB Portion 15% Retail Portion 35% Book Running Lead Managers: Kotak Mahindra Capital JM Financial Goldman Sach J P Morgan Registrar Karvy Computershare Pvt. Ltd. Company & Business Profile: Bandhan Bank Ltd, a commercial bank was incorporated on 23rd December, It began operations on 23rd August 2015 when parent Company Bandhan Financial Services Limited (BFSL) transferred its entire MFI business to them and Bandhan simultaneously commenced general banking activities. In 2001, Bandhan Konnagar was formed as a NGO providing microfinance services to socially and economically disadvantaged women in rural West Bengal. BFSL started its microfinance business in 2006 and the NGO transferred its microfinance business to BFSL in 2009 and thereby the entire microfinance business was undertaken by BFSL. When BFSL transferred its microfinance business to Bandhan Bank, it was India s largest microfinance company in terms of loan portfolio and number of customers. Bandhan Bank is focused on serving underbanked and underpenetrated markets in India across customer segments. Bank s strength lies in microfinance, including a network of 2,633 Doorstep Service Centers ( DSCs ) and 9.86 million micro loan customers as of December 31, It 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. Its 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, with focus is to expand across India. Bandhan Bank has built a strong base of Current Account and Savings Account deposits, which together stood at Rs.8, crore as of December 31, 2017, a CASA ratio of 33.22%. Moreover, as of December 31, 2017, its retail-to-total deposit ratio stood at 85.07%. As of December 31, 2017, its Deposits and Gross Advances stood at Rs.25, crore and Rs.24, crore, respectively. 1 Source: Ace Equity, Arihant Research

2 Promoter and Promoter Group: The Promoters of Bandhan Bank is Bandhan Financial Holdings Limited ( BFHL ), Bandhan Financial Services Limited ( BFSL ), Financial Inclusion Trust ( FIT ) and North East Financial Inclusion Trust ( NEFIT ). BFHL holds 981,483,046 Equity Shares, representing 89.62% of the issued and paid-up Equity Share capital of Bandhan Bank. Dr. Ashok Kumar Lahiri is the Independent Director (part-time Chairman) of the Bank. He has significant experience in the banking sector. Previously, he has worked in the capacity of a Director at Asian Development Bank. He has been a director on the Board since July 10, Chandra Shekhar Ghosh is the Managing Director and Chief Executive Officer of the Bank. He has significant experience in the finance and microfinance sector. He has been a director on the Board since July 10, Objectives of issue: To augment the Bank s Tier-I capital base to meet the Bank s future capital requirements General Corporate Purposes Peer Comparison: Comparison of Accounting Ratios with Peers (Consolidated as at 31st March 2017) Company Name Total Income Face Value (Rs.) EPS (Basic) P/E P/B NAV ROE Bandhan Bank 4, * * HDFC Bank 81, Bajaj Finance 10, Gruh Finance 1, AU Small Finance Bank 1, Equitas Holdings 1, Ujjivan Financial Services 1, In Cr Source: Ace Equity, Arihant Research 2

3 Loan and Deposit Growth in financial year 2017 In Cr Company Name Loans O/S Advances Growth Deposits Deposits Growth CASA Ratio Total Income PAT Bandhan Bank 16, % 25, % 29.4% 4,320 1,111 HDFC Bank 554, % 643, % 48.0% 81,600 14,550 Bajaj Finance 60, % NA NA NA 10,003 1,840 Gruh Finance 13, % NA NA NA 1, AU Small Finance Bank 10, % NA NA NA 1, Equitas Small Finance Bank 7, % 1,920 NA 5.0% 1, Ujjivan Financial Services 6, % 110 NA 3.0% 1, *NA: Being NBFC they cannot accept deposits. NIM Key Accounting Ratios As at 31st March 2017 Yield on Advances Cost to income Ratio Capital Adequacy Ratio Tier 1 capital Gross NPA Net NPA Bandhan Bank HDFC Bank Bajaj Finance Gruh Finance AU Small Finance Bank Equitas Small Finance Bank Ujjivan Financial Services Competitive Strengths: Operating Model Focused on Serving Under banked and Underpenetrated Markets. Consistent Track Record of Growing a Quality Asset and Liability Franchise. Low Cost Distribution Network. Customer-Centric Approach. 3

4 Strategy going forward: Aim to maintain focus on micro lending while expanding further into other retail and SME lending. Aim to strengthen the liability franchise with a particular focus on growing deposit base. Bank intends to boost non-interest income in order to diversify income stream and improve margins. Enhancement of digital platform to improve customer acquisition & cost reduction Financial Snapshot: Particulars (Rs. in Cr) Dec 31,2017 March 31,2017 March 31,2016 Interest income PBT PAT Book Value 9066* *Fresh issue of 3662Cr and book value as on Dec.17, 5404Cr *Total book value= 9066Cr Valuation: The issue has been offered at a price band of Rs per equity share. At the upper price band of Rs 375, the stock is available at price-to-book value multiple of 4.9(x) its FY18 BVPS of 76.Considering the unique operating model, we have 4 star rating for the issue. 4

5 Arihant Research Desk E. T Head Office #1011, Solitaire Corporate park, Building No. 10, 1 st Floor, Andheri Ghatkopar Link Road Chakala, Andheri (E) Mumbai Tel: (91-22) Fax: (91-22) Registered Office Arihant House E-5 Ratlam Kothi Indore , (M.P.) Tel: (91-731) Fax: (91-731) Research Analyst Registration No. Contact Website Id INH SMS: Arihant to research@arihantcapital.com Disclaimer: This document has been prepared by Arihant Capital Markets Ltd. This document does not constitute an offer or solicitation for the purchase and sale of any financial instrument by Arihant. This document has been prepared and issued on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst meticulous care has been taken to ensure that the facts stated are accurate and opinions given are fair and reasonable, neither the analyst nor any employee of our company is in any way is responsible for its contents and nor is its accuracy or completeness guaranteed. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Arihant may trade in investments, which are the subject of this document or in related investments and may have acted upon or used the information contained in this document or the research or the analysis on which it is based, before its publication. This is just a suggestion and Arihant will not be responsible for any profit or loss arising out of the decision taken by the reader of this document. Affiliates of Arihant may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. No matter contained in this document may be reproduced or copied without the consent of the firm. Arihant Capital Markets Ltd. 5