Bandhan Bank's Rs 45 billion IPO to open for subscription next week

At IPO price, the microfinance-focused bank is valued at nearly Rs 450 billion

Kolkata-based Bandhan Bank Rs 45-billion initial public offering (IPO) will remain open for subscription between March 15 and March 19. The microfinance-focused bank will issue fresh shares worth Rs 37 billion in the IPO. The offering also comprises of Rs 8 billion worth secondary share sale by the International Finance Corporation (IFC), an investment arm of the World Bank. The price band for the IPO has been fixed at Rs 370 to Rs 375 per share. At the top end of the price band, Bandhan Bank will be valued at nearly Rs 450 billion, making it the eight most valuable bank in the country.

The bank's market value will be higher than all public sector banks (PSB), expect State Bank of India (SBI). After the recent correction, the market value of Bank of Baroda and Punjab National Bank (PNB) has dropped to Rs 310 billion and Rs 235 billion respectively. On the price-to-book value basis, Bandhan Bank is valued at nearly four times, more than most banks.

 

Source: Exchanges

The IPO will lead to 10 per cent dilution. Post the IPO, the promoter holding in the bank will drop to 82 per cent.

Bandhan Bank's IPO is part of Reserve Bank of India (RBI) requirement for new banks to list within three years of setting up a bank branch. The listing deadline for Bandhan Bank was to end in August.

The bank, however, is set to miss another RBI requirement that of bringing down promoter holding to 40 per cent within three years of listing. The post-listing promoter holding of 82 per cent will be have to be locked-in for one year as per market regulator Sebi regulations.

Bank officials said they plan to seek RBI's permission to extend the deadline for bringing down promoter holding to 40 per cent.

Bandhan Bank's IPO is coming at a time when the stocks, particularly in the banking space, have seen a sharp correction. The benchmark Nifty is down nine per cent from its peak in January, while the Bank Nifty index has come off around 12 per cent from its peak.

Investment bankers are, however, confident that the issue will garner good response.

"Markets will always show some volatility. The bank's fundamentals are very strong. It has a differentiated business model. Despite the market corrections, the issue will do well," said Vishal Kampani, MD, JM Financial Group.

Bandhan Bank and IDFC Bank are among the latest entities to be awarded bank licenses by the RBI. The two received the central bank's "in-principle" in April 2014 and a final nod a year later.