Started in 2014, Bandhan Bank Limited is a commercial bank focused on serving underbanked and under penetrated markets in India. BBL has a banking license that permits it to provide banking services pan-India across customer segments. BBL currently 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. BBL was incorporated on December 23, 2014 and began operations on August 23, 2015 when Bandhan Financial Services Limited ('BFSL'), its ultimate parent company, transferred its entire micro-finance business to them and they simultaneously commenced general banking activities. Bandhan Konnagar was formed in 2001 as a non-governmental organisation ('NGO') providing micro-finance services to socially and economically disadvantaged women in rural West Bengal. BFSL started its micro-finance business in 2006 and the NGO transferred its micro-finance business to BFSL in 2009 and thereby the entire micro-finance business was undertaken by BFSL. By the time BFSL transferred its micro-finance business to BBL, it was India's largest micro-finance company by number of customers and size of loan portfolio. 1192804944 BBL's asset products consists of retail loans including a substantial portfolio of micro loans, as well as micro, small and medium enterprise ('SME') loans and small enterprise loans. Its liability products consists of savings accounts, current accounts and a variety of fixed deposit accounts. Since beginning banking operations, company has built a strong base of current account and savings account deposits, which together stood at ? 71,700.39 million as of September30, 2017, a CASA ratio of 28.18%. Moreover, as of September 30, 2017, company's retail-to-total deposit ratio stood at 76.09%. In addition to loan and deposit products, it also offers other banking products and services to generate non-interest income and cater towards the additional needs of its 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. In addition, because its PSL portfolio significantly exceeds the RBI's PSL requirements, BBL generates PSL certificates that company is able to sell to other banks, generates an additional stream of non-interest income. On financial performance front, Bandhan Bank has posted turnover/net profits of Rs. 7.95 cr. / Rs. 0.58 cr. (FY15), Rs. 1731.23 cr. / Rs. 275.25 cr. (FY16) and Rs. 4320.12 cr. / Rs. 1111.95 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 957.70 cr. on a turnover of Rs. 3954.51 cr. Thus company has posted healthy growth over last couple of years on consistent basis. BBL has posted an average EPS of Rs. 6.21 and average RoNW of 15.27% for last three fiscals. Issue is priced at a P/BV of 7.60 for NAV of Rs 49.35 on 30.09.17. Listed peers as per DRHP are trading in range of 4 to 62 P/E ratio with average of 34. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 35, so issue is fully priced. On BRLM's front, five merchant bankers associated with this offer, have handled 80 public offers in the past three years. For Kotak, Out of last 10 listings, 4 opened at discount, 1 at par and the rest with a premium of 3% to 145% on the day of listings. For Axis, Out of last 10 listings, 5 opened at discount, 1 at par and the rest with a premium on the day of listings. For JM Financials, Out of last 10 listings, 2 opened at discount, 1 at par and the rest with a premium on the day of listings. As per financials, company's growth is very good, RoNW is 15.27% for last three fiscals and issue is priced at P/E of around 35 as per latest earnings. Recent issues with banking sector is major concern, but this bank has nothing to do with all these issues and its a dominating player in micro finance and will also remain in future. As Government of India is focusing on rural banking and insurance, this bank will get benefit from these steps and we expect it may continue to grow with good rate. So we give SUBSCRIBE rating to this IPO.
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