The financial services entity turned lender Bandhan Bank got a SEBI go-ahead for the IPO after two months of filing the DRHP in order to raise Rs 2,500 crore through the initial public offering. Bandhan Bank was the first Indian microfinance entity which was given a bank license by the Reserve Bank of India in 2014. The Kolkata-based private sector lender Bandhan Bank had paved the way for share sale way back in 2017 following which the bank filed DRHP (draft red herring prospectus) with SEBI (Securities and Exchange Board of India) on 1 January 2018. Earlier last week, Bandhan Bank obtained observations from the Indian capital market regulator SEBI.
We take a look at seven things about India’s biggest bank IPO ever
As per the DRHP, Bandhan Bank initial public offering entails an issue of up to 11.9 crore shares of face value of Rs 10 per equity share, involving a fresh issue of about 9.7 crore shares and an offer for sale of around 2.16 crore shares by International Finance Corporation and IFC FIG. Bandhan Bank’s Rs 2,500 crore IPO will be the biggest initial share sale by a banking unit ever in India, PTI said in a report citing merchant banking sources. The price band of the share sale had not been decided so far. The shares of Bandhan Bank are proposed to be listed on both NSE and BSE.
Proceeds of IPO
The proceeds from the IPO will cater the respective needs of the bank and the selling shareholders. According to the DRHP, the selling shareholders will be entitled to the respective portion of the proceeds of the offer for sale after deducting the issue related expenses and the bank will not receive any proceeds from the offer for sale. While the proceeds from the fresh issue will be utilised to augment Bandhan Bank’s Tier-1 capital base to meet further capital requirements in future. The proceeds of the fresh issue will be further absorbed in capital requirements for organic and inorganic growth and expansion of Bandhan Bank and to comply with regulatory requirements for an enhanced capital base.
Bandhan Bank IPO is floating the initial public offering with regard to Reserve Bank of India’s licensing guidelines. According to the RBI new bank licensing guidelines, the equity shares of our Bandhan Bank are required to get listed on the stock exchanges within three years from the date of commencement of business, i.e., on or before 22 August 2018.
Merchant bankers & advisors to the issue
Earlier in September last year, Bandhan Bank has appointed five merchant bankers for its initial share sale. The book running leading managers include (India) Securities Pvt Ltd, Kotak Mahindra Capital Company Ltd, Axis Capital Ltd, JM Financial Institutional Securities and JP Morgan India Private Ltd while Karvy Computershare Private Ltd is the registrar to the issue. Amid the legal advisors to the issue, Cyril Amarchand Mangaldas is Indian legal counsel to Bandhan Bank, Khaitan & Co is the Indian legal counsel to book running lead managers, Clifford Chance is the international legal counsel to book running lead managers and AZB & Partners is the Indian legal counsel to the selling shareholders.
Bandhan Bank’s profile
Bandhan Bank commenced its operations as a banking entity on 23 August 2015 with 501 branches across 24 states after it transformed from microfinance entity to a universal bank. Bandhan Bank is backed by GIC Pte (Singapore’s sovereign wealth fund) and International Finance Corporation (IFC), a member of the World Bank Group. Both the entities hold nearly 5% stake in Bandhan Bank.
As of September 2017, Bandhan Bank has 840 branches and 383 ATMs, with 11 million customers with 70% of its branches presented in the rural areas. Bandhan Bank has a loan book of Rs 20,800 crore and has mobilised deposits amounting Rs 23,500 crore. The micro-lending constitutes about 90% of the Bandhan Bank’s total loan book. Chandra Shekhar Ghosh had said, “ we expect in the next 3-5 years non-micro loans will be around 25% of our total loan book.”
Bandhan Bank had the total assets to the tune of Rs 30,236 crore and a revenue of Rs 4,320.12 crore at the end of 31 March 2017. Bandhan Bank reported a four-fold rise in the net profit to Rs 1,111.95 crore for the financial year ended 31 March 2017 as against a net profit of Rs 275.24 crore in the comparable previous year. Bandhan Bank’s net profit in the July-September period more than doubled to Rs 657.65 crore from Rs 327 crore in the preceding quarter.
In August 2017, Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank said I will not defer the launch of IPO, but the timing of its launch will depend on the market conditions. In 2016, Chandra Shekhar Ghosh had said he would prefer more lenient terms for the timing of the listing on stock exchanges for his bank as according to the on-tap universal banking licences guidelines, new banks would have to be listed within six years of the commencing business.