Bandhan Working on Many Strategies to Bring Down Promoter Shareholding
Bandhan Bank managing director Chandra Shekhar Ghosh is looking at “all options”, including mergers and acquisitions, and diversification into other lines of financial service, to dilute promoter shareholding. In an interview with Shilpy Sinha, Ghosh talks about the Bandhan Bank-Gruh Finance merger deal, opportunities in affordable housing, and the MSME segment. Edited excerpts… When I decided to apply for a bank licence, nobody believed me. I saw the potential, saw huge opportunity in affordable housing and in MSMEs. There is need for 20 million houses, when only around 8 lakh have been built. There is need for ₹ 2 lakh crore for affordable housing till 2022. Our customers are with us for 7-8 years. We can introduce affordable housing products to them. We can also look at offering MSME loans to Gruh customers. There are good opportunities. We have stable deposit growth, and last quarter our deposit growth was 37%.
Was there a kind of compromise on This merger has helped us dilute 21% promoter shareholding. We first discussed Gruh three years ago. It was a choice between acquiring a listed entity and getting automatic listing, or listing the bank first and then looking for an acquisition. We were focusing on stabilising deposits.
How do you plan to further reduce promoter shareholding to 40%?
We have a good strategic plan, and we will be working on it. We do not know how long the regulators will take. Any merger process takes anything between 9 and 12 months. There could be three strategies -- first, mergers or acquisitions; second, form a subsidiary under NOHFC -- use money for other businesses; and third, raise more equity. Until it is finalised, we cannot give a specific strategy. My cost of funds today is 6.3%. If you add 30 basis points for SLR and CRR, the cost of funds will only be 6.6%. This is not higher than Gruh’s 8.5% cost of borrowing. Last year, our third-quarter profit was Rs 300 crore and this year it is Rs 331 crore. If you take out the IL&FS exposure of Rs 385 crore, our profit would have been up 93%. We have got CASA of over 50% and retail deposit of 84%. Our focus is on retail deposit and credit. Our net NPA is 0.7% after provision. Credit quality has stabilised and 87% of our loan is micro credit, which has seen 1% increase over the previous quarter. We have seen one-time repayment of 99.04%, which means the portfolio is stable. This had come down during demonetisation.
Your credit has grown when MFIs faced credit crunch and saw a decline in AUM for the first time since demonetisation. Did you benefit from the crisis?
72% of our customers are single borrowers and have stayed with us for seven years. The retention of customers is crucial to our model. This year, we have opened 381 microcredit offices as we like to reach out to new customers. We also focus on how employee attrition will come down.
Your NPAs are stable. Do you expect any change in repayment habit after loan waivers were announced in three states?
The clear beneficiary of agriculture loan waiver is not the micro-credit borrower. It takes a long time to build a habit of loan repayment. The borrowers are now maturing because they have seen that they have not benefitted from a few incidents in the past.
Gruh and Bandhan are very different organisations, culturally. How do you plan to ensure the shift and what will be the key to the success of this merger?
Gruh has a long association with its people, so do we. We are very focused on cost, so are they. Only difference is product -- they have long- term and we have shorter-term products. But I think that the best merger happens after marriage.
There’s a view that Bandhan doesn’t derive much in terms of business gains from acquiring Gruh, but it just helps in reducing the promoter stake. Do you agree? business reasons to meet the regulatory needs? Considering the drag of CRR and SLR, there is hardly any borrowing cost advantage for Gruh. In fact, the cost of borrowing could only go up. How does it affect the financial metrics? Your quarterly profit is muted compared with the previous quarters. Is it because of IL&FS exposure?