Bandhan Bank Ltd - IPO NOTE - Arihant Capital Markets

Company & Business Profile:

Bandhan Bank Ltd, a commercial bank was incorporated on 23rd December, 2014. 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, 2017. 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.8,401.85 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.25,293.96 crore and Rs.24,364.39 crore, respectively.

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, 2015.

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, 2015.

Objectives of issue:

- To augment the Bank's Tier-I capital base to meet the Bank's future capital requirements
- General Corporate Purposes

Valuation:

The issue has been offered at a price band of Rs 370-375 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.

Source : Equity Bulls

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