Bandhan Bank promoters sell 21%

Bandhan Bank’s promoters on Monday offloaded nearly 21 per cent stake in the bank to comply with the Reserve Bank of India’s (RBI’S) ownership rule.

Bandhan Financial Holdings (BFHL), the holding company of the bank, sold nearly 337.4 million shares at a minimum of ~311 apiece to raise ~10,500 crore. The stake sale was done through multiple block deals on the stock exchange platform.

While the domestic market had seen bigger share sales through block deals, this was one of the largest in terms of percentage shareholding, said experts. Credit Suisse, JP Morgan, Goldman Sachs, and JM Financial were the investment bankers that handled the share sale.

With the stake sale, shares of Bandhan Bank tanked 10.6 per cent to ~309 apiece on Monday, where shares worth ~11,800 crore changed hands. “All the licensing conditions for the bank are now complied with,” Bandhan Bank said.

According to RBI’S licensing norms, any bank offering ‘universal’ services need to bring down the promoter’s stake to 40 per cent in three years from the date of commencement of operations.

In 2018, when Bandhan Bank got listed, the promoter stake stood at 82.3 per cent. Since then, the bank had been exploring various options to dilute the promoter stake to meet the RBI requirement. In fact, last year, the central bank had imposed restrictions on branch expansion on the bank after it had failed to lower promoter stake to 40 per cent.

Prior to the stake sale, BFHL’S stake stood at 60.96 per cent, after mortgage lender — Gruh Finance — was merged with Bandhan Bank in October 2019.

Chandra Shekhar Ghosh, managing director and chief executive, said in February the RBI removed restriction on branch expansion. After that, the Covid-19 pandemic happened, due to which Bandhan could not open branches.

Now, the bank has a plan to expand network. As for freeze on salary to top executive, it is subject to RBI decision. The bank has given a report that it is compliant with norms (stake holding). Referring to use of proceeds from sale of stake, Ghosh said, now, the holding company can start insurance and mutual fund businesses, subject to RBI approval.

The board of the holding company will either decide to start business or give dividend or do both. In insurance, the option is open to pick up stake in the company.

Though Bandhan Bank is now on a par with RBI’S norms on promoter holding, there are some near-term fundamental worries, mainly on the asset quality front. This is owing to over 65 per cent of its loan book coming from microfinance.

Deepak Jasani, head of research-retail at HDFC Securities, said, “The microfinance segment has been impacted by the pandemic-led disruptions. This, along with the floods in Assam, which is a key state for Bandhan Bank, could put some pressure on the bank’s asset quality.” Some comfort, however, is that the bank’s collection efficiency has improved to 76 per cent in June from 29 per cent in April.