Bandhan Bank's IPO opens today: Here's what you should know before you subscribe

Photo: Reuters

New Delhi: The Kolkata-based lender Bandhan Bank is coming out with its initial public offering (IPO) to raise Rs 4,473.75 crore from the public through the sale of 11.93 crore equity shares.

The price band of the issue is Rs 370-375 per equity share with face value of Rs 10 each. The issue is scheduled to open on March 15 and close on March 19, 2018.

The equity shares of Bandhan Bank are proposed to be listed on both the NSE and BSE. Its investment banking arms - Kotak Mahindra Capital Company, Axis Capital - are merchant bankers for its IPO.

Here's what brokerages recommend on the Bandhan Bank IPO:

Centrum Wealth Research

At the higher end of the price band of Rs 375, the issue is priced at 10.2x its FY17 adjusted book value (ABV) and 8.6x its 9MFY18 ABV. At this valuation, while the issue seems richly priced, the bank has a unique business model which cannot be directly compared to any other bank or NBFC in India.

Given the high valuations, investors can subscribe to the issue from a long-term perspective. It must be noted that since the issue is being offered at an expensive valuation, listing gains may be capped.

LKP

It has one of the best return ratios - ROE of 28% and ROA of 4.4% (9MFY18). We are positive on the bank and recommend investors to subscribe to the issue. We expect PAT to grow at a CAGR of 40% during FY18-20E.

It is trading at 3.8x FY19E & 3.2x FY20E ABV. Although the valuations look superior, in our view, it would command scarcity premium as it is the only MFI that has received the universal banking license.

ICICIdirect

Bandhan Bank is now a commercial bank focused on serving underbanked and underpenetrated markets in India. As of December 31, 2017, Bandhan Bank operates 887 branches and 2,633 dedicated doorstep services centres servicing 1.2 crore customers in 33 states.

At the IPO price band of Rs 370-375, the stock is available at a multiple of 4.7x FY18E BV post fresh issue (based on 9MFY18 annualised PAT) at the upper end of the price band.

On a P/E basis, it is available at 34.4x FY18E earnings at the upper band. Post issue market capitalisation has been calculated at Rs 44728 crore. We recommend subscribe.

Arihant Capital

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.

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%.

Bandhan Bank, Bandhan Bank IPO, IPO