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Bandhan Bank’s IPO subscribed nearly 15 times after strong turnout on final day

19 March, 2018

Bandhan Bank Ltd’s initial public offering (IPO) was subscribed nearly 15 times after strong turnout on the final day that saw continued institutional bidding and last-minute applications from high net-worth individuals.

The public issue of 83.49 million shares, excluding the anchor allotment, received bids for nearly 1.22 billion shares during the three-day sale, stock-exchange data showed on Monday.

Institutional buyers bid for 922.62 million shares, or 38.67 times, the portion reserved for them. High net-worth individuals and corporate bodies’ quota was subscribed 13.89 times.

The slot for retail investors, who cannot individually bid for shares exceeding Rs 2 lakh in value, was covered 1.16 times.

Bandhan Bank’s steep pricing, and the weakness in markets – that comes against a backdrop of over $2 billion fraud at state-run Punjab National Bank – kept retail investors away, analysts said.

Geetanjali Kedia, senior research analyst at securities advisory firm SP Tulsian, said Bandhan Bank’s one-year forward price-to-book value (P/B) is four, when calculated at the upper end of the Rs 370-375 price band. Thee P/B multiple is the highest among all listed Indian banks. Book value is net worth.

“As of now, HDFC Bank is ruling at 2018-19 P/B multiple of 3.8… Although not an apple-to-apple comparison, if one were to draw parallels with another micro-financial institution (MFI) that transitioned to being a bank, although a small finance bank, Ujjivan Financial Services, with smaller size, clocked higher net interest margin than Bandhan,” Kedia said, adding that investors should wait for attractive price points and that more options are within the banking sector.

The IPO was covered 42% on the first day on Thursday and 88% on Friday.

The Kolkata-based lender had raised Rs 1,342 crore ($207 million) from a clutch of anchor investors, including Abu Dhabi’s sovereign wealth fund and Singapore state investor Temasek Holdings, a day ahead of the IPO.

The bank counts Singapore sovereign wealth fund GIC Pte. Ltd and International Finance Corporation among its backers. IFC is the private-sector investment arm of the World Bank.

Bandhan Bank, India’s first microfinance lender to receive a universal banking licence, is seeking Rs 44,730.18 crore ($6.86 billion) in valuation from its maiden public offering.

The public issue comprises a fresh issue of 97.66 million shares worth Rs 3,662.39 crore at the upper end of the price band, besides a secondary market sale by IFC – directly and through its fund IFC FIG Investment Company.

In all, IFC is selling 21.61 million shares out of the 54.04 million shares it held in Bandhan Bank. After the IPO, IFC will have a 2.71% stake in the company after accounting for the fresh issue of shares, VCCircle estimates show.

The total IPO size is Rs 4,473 crore ($686.56 million) and will see a 10% stake dilution on a post-issue basis.

The promoter entity, Bandhan Financial Holding Ltd’s stake will fall to 82.28% after the issue from the existing 89.62%. The promoter will get three years, from the date of listing, to bring its stake down to 75%, to comply with the minimum public float norms by SEBI.

The microfinance lender had filed its draft prospectus on 1 January. It had received regulatory nod on 28 February.

Kotak Mahindra Capital Co, Axis Capital, Goldman Sachs (India) Securities, JM Financial Institutional Securities, and JP Morgan India are merchant bankers managing the IPO.

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Bandhan Bank’s IPO subscribed nearly 15 times after strong turnout on final day

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