GIC-backed Bandhan Bank hires merchant bankers for IPO
Photo Credit: Shah Junaid/VCCircle

Bandhan Bank Ltd, India’s first micro-finance lender to receive a universal banking licence, has picked five merchant banks as it gears up for its planned initial public offering (IPO) next year, three people familiar with the matter told VCCircle.

The Kolkata-based bank, which counts Singapore’s sovereign wealth fund GIC Pte and the World Bank's private-sector investment arm International Finance Corporation among its backers, has appointed Goldman Sachs, JPMorgan, Axis Capital, JM Financial and Kotak Mahindra Capital Co as merchant bankers.

The IPO size is estimated at Rs 5,500 crore ($860 million). While the offer structure is not yet finalised, the bank will sell about 10-12% stake to the public through a combination of primary and secondary sale, said one of the persons cited above.

Bandhan, which started off as a micro-finance company in 2001, received the Reserve Bank of India's nod to start banking operations in April 2014. It kicked off banking operations the subsequent year.

The micro lender currently has 841 branches and a customer base of more than 11 million, according to its website. It has a loan book of about Rs 21,900 crore.

Bandhan’s net interest margin, that is, the difference between the rate a bank charges for loans and pays for deposits, stood at 10.75% for the three months ended June 2017—the highest among all Indian banks, Bloomberg data showed.

Its bad loan ratio stood at 0.82% compared with 0.22% in the corresponding period last year. Net non-performing assets (NPAs) rose to 0.49%, up 14 basis points.

Bandhan reported 35% growth in net profit during the quarter ended June 2017 to Rs 327 crore, compared with Rs 242 crore in the same period last year.

It had reported a net profit of Rs 1,111.95 crore for FY17. A comparable year-ago figure isn't available because the lender started operations only in August 2015.

Gross advances for FY17 were Rs 23,543.29 crore and deposits stood at Rs 23,229 crore, with current and savings accounts contributing 29.43% of total deposits.

Bandhan's capital adequacy ratio, an indicator of financial strength, was 26.36% at the end of FY17.

Bandhan, which converted from a micro-finance institution to a full-fledged lender, kept its focus on borrowers who make up more than 90% of its loan book. Going forward, it intends to diversify into affordable housing and loans to micro enterprises.

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