Bandhan Bank outpaces BoB, PNB on debut; stock gains 25% on issue price

Shares of Bandhan Bank gained 25 per cent in its debut trade on Tuesday, over the issue price of Rs 375. The stock closed at Rs 470, up Rs 95, or 25 per cent, over its issue price on the National Stock Exchange (NSE).

At the current market price, Bandhan Bank is valued at Rs 569 billion, making it the country’s eighth-most valuable lender. The bank is valued at nearly twice that of Bank of Baroda and Punjab National Bank — the second- and third-largest state-owned lenders.

Intra-day, Bandhan Bank’s scrip had touched a high of Rs 499 and a low of Rs 455 on the NSE and the BSE. Shares worth Rs 50 billion were traded on both the exchanges.

The stellar show comes on the back of high demand for the bank’s shares during its Rs 45-billion initial public offering (IPO).

The issue was subscribed close to 15 times, with institutional investors scrambling to pick up shares of the microfinance-focused universal bank. The huge demand was despite the lender asking for steep valuations compared to other private sector peers.

Analysts said investors were betting on Bandhan Bank’s high growth potential and low-cost business model. The Kolkata-based lender focuses on under-banked and under-penetrated regions in eastern India. Most brokerages had recommended their clients to subscribe to the bank’s maiden offer.

“We expect the return ratios to sustain in the range of 18-20 per cent with a profit CAGR (compounded annual growth rate) of 22-25 per cent over the next two-three years,” Elara Capital had said in an IPO note asking investors to subscribe with a long-term view.

“Though valuations are on the higher side, we expect such premium valuations to persist given (a) healthy return ratio, balance sheet strength and experienced and focused management,” Angel Broking had said.

Bandhan Bank’s IPO comprised fresh fundraising worth Rs 37 billion and secondary share sale worth Rs 8 billion by International Finance Corporation (IFC), World Bank’s investment arm.

Bandhan Bank’s listing day gains were the best after Amber Enterprises, whose shares had soared 44 per cent on debut in January. Besides Bandhan Bank and Amber, most listings this year have been tepid.