Bandhan Bank Ltd - IPO Note - Subscribe - HEM Securities

Bandhan Bank Ltd ( BBL) was incorporated on December 23, 2014 and began operations 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 have increased to 887 bank branches and 430 ATMs, together serving over 2.13 million general banking customers. Bank's 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 as of December 31, 2017.

Consistent track record of growing a quality asset and liability franchise: As of December 31, 2017, bank's percentage of Gross NPAs to Gross Advances (excluding IBPC/Assignment) ("NPAs") was 1.67% of its portfolio. Bank's strong NPA position is largely driven by its group-based individual lending model, its focus on income generating loans made to women, its strong systems to track loan utilization, monitor credit and ensure collection, and its extensive risk management practices, such as lending progressively higher amounts only to members who have built up a track record of good repayment, which taken together have led to low rates of default.

Operating model focused on serving underbanked and underpenetrated markets: BBL is a commercial bank focused on serving underbanked and underpenetrated markets in India. Its historical strength lies in microfinance, with its group beginning operations in 2001 as an NGO providing microfinance services to socially and economically disadvantaged women in rural West Bengal. While bank's business model has transitioned over the years, operating as an NGO and then a non-bank finance company ("NBFC") before becoming a bank, the provision of micro loans to women has remained the core focus.

Valuation: The Bank is bringing the issue at p/b multiple of 4.9-4.93 on post issue book value at price band of Rs 370-375/share. Bank with its operating model focused on serving underbanked and underpenetrated markets has consistent track record of growing a quality asset and liability franchise with extensive, low cost distribution network & customer-centric approach and experienced and professional team, backed by strong independent board. Hence, we recommend "Subscribe" on issue.

Source : Equity Bulls

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