Bandhan Bank stock nears all-time low, slips 27% thus far in 2020

Analysts have fundamental concerns on over-leverage in core markets of eastern India and an inability to meaningfully diversify away from microfinance and concentration risk

Shares of Bandhan Bank slipped 7 per cent to Rs 370.60 on the BSE on Friday, thus erasing entire gain recorded since Tuesday after the Reserve Bank of India (RBI) lifted restrictions placed on the bank from opening new branches.

The private sector lender's stock was quoting close to its all-time low of Rs 369.15, touched on October 16, 2018. The bank issued shares at Rs 375 per share in its initial public offer (IPO) and debuted on the bourses on March 27, 2018. The stock touched an all-time high of Rs 741 on August 9, 2018.

With today’s fall, Bandhan Bank has tanked 27 per cent thus far in the calendar year 2020. In comparison, the S&P BSE Sensex was down 5 per cent during the same period.

The RBI had lifted the “regulatory restriction” on opening of branches by Bandhan Bank, provided the bank ensured at least a quarter of all banking outlets opened by it during a financial year were in unbanked rural centres, Bandhan Bank informed stock exchanges on Tuesday.

However, analysts have fundamental concerns on over-leverage in core markets of eastern India; inability to meaningfully diversify away from microfinance and concentration risk.

Bandhan Bank reported strong profitability, robust capitalisation, healthy resource profile supported by demonstrated ability to build up a retail deposit franchise and healthy reported asset quality over the past four years.

However, these strengths are partially offset by geographic concentration in operations and exposure to local socio-political risks inherent in the micro loan business, modest credit profile of borrowers and potential risk of regulatory strictures linked to non-dilution of promoter holding, rating agency Crisil said.

The bank's significant presence in East and North-East India regions exposes it to geographical concentration risk, inherent to the segment, it said.

At 01:51 pm, Bandhan Bank had partially erased its losses and was trading 3 per cent lower at Rs 387 on the BSE. In comparison, the S&P BSE Sensex was down 2.7 per cent at 38,668 points. The counter has seen huge trading volumes with a combined 8.1 million shares changing hands on the NSE and BSE so far.