Bandhan Bank has filed for Rs 2,500-crore initial public offer (IPO) with market regulator Sebi.
The IPO comprises 11.9 crore equity shares, according to the draft red herring prospectus filed with Sebi. The bank proposes to offer up to 119,280,494 equity shares of face value of Rs 10 each at a price to be determined through a book building process including premium.
We look at the prospects and financials of the lender's market debut.
1. The Bandhan Bank IPO will comprise fresh issue of up to 97,663,910 equity shares and an Offer for Sale of up to 14,050,780 equity shares by International Finance Corporation (IFC) and up to 7,565,804 equity shares by IFC FIG Investment Company.
The equity shares are proposed to be listed on the BSE and NSE. The book running lead managers to the IPO are Kotak Mahindra Capital Company, Axis Capital, Goldman Sachs (India) Securities, J M Financial Institutional Securities and J P Morgan India.
2. Bandhan Bank began operations on August 23, 2015 when Bandhan Financial Services Limited (BFSL), its parent company, transferred entire microfinance business to the bank. Since then, the bank has expanded to 864 branches servicing approximately 11 million customers located in 33 states as of September 30, 2017.
It started operations with 501 branches servicing approximately 7 million customers located in 24 states across India as of August 23, 2015. The number of ATMs and dedicated door step services centres (DSCs) stood at 386 and 2,546 as of September 30, 2017, respectively compared with from 50 and 2,022 as of August 23, 2015.
3. Interest earned during fiscal year 2017 represented 90.48% of its total income (interest earned plus other income). The bank's gross advance to deposit ratio as of September 30, 2017 stood at 76.54%.
The bank had a healthy capital adequacy ratio (CAR)of 26.24% in September 2017. The RBI requires a minimum capital adequacy ratio of 13% of a bank's total risk-weighted assets. The capital adequacy ratio (CAR) measures percentage of a bank's risk weighted credit exposures.
4. The bank clocked net interest margins (NIMs) of 10.01% and 10.39%, for the half-years ended September 30, 2017 and 2016. Net interest margin is calculated by dividing the difference of investment income and interest expenses by the average earning assets.
Its return on equity (RoE) came to 27.23% and 28.79%, respectively for the above period.
5. The bank's deposits have grown from zero as of August 23, 2015 to Rs 254,421.70 million as of September 30, 2017, with its CASA ratio standing at 28.18% and retail-to-deposit ratio standing at 76.09% as of September 30, 2017.
CASA ratio is the ratio of deposits in current and saving accounts to total deposits. A higher CASA ratio indicates a lower cost of funds.
6. The bank's net interest income in FY 2017 amounted to Rs 24,034.98 million compared to FY 2016 amounted to Rs 9,328.36 million.