Incorporated in West Bengal in 2001, Bandhan Bank is one of the two players to receive RBI’s universal banking license in 2015. It is the only bank which is purely into microfinance business with the balance sheet size of Rs 332 bn. Currently, it has 2633 DSCs (Doorstep Service Centres), 887 bank branches, 430 ATMs together serving 9.86 mn micro loan customers & 2.13 mn general banking customers. It has dominant presence in the east with West Bengal, Assam, Bihar together accounting for 57% of the branches.
Currently, in our view, it enjoys the benefits of the both the worlds – on the asset side, micro-loans carry top quartile yields and on the liability side, funding cost is reducing continuously after it has received banking license – both these factors combined is giving good margins to the bank. Lending to low-income group which is high cost business model, there are very few profitable players & Bandhan Bank is one of them.
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We expect PAT to grow at a CAGR of 40% during FY18-20E. IPO would result in 9% equity dilution. Return ratios would come off in the near term with this capital raising – bringing ROE & ROA to 18% & 3.9% for FY18E. However, we expect return ratios to improve by FY20E (ROE 19.3% & ROA 4.3%) onceit leverages on capital raised. It is trading at 3.8x FY19E & 3.2x FY20E ABV. Although the valuations look superior, in our view, it would command scarcity premium as it is the only MFI that has received universal banking license.
What started as one of India’s first securities brokerage houses in 1948 is today one of the country’s largest multi dimensional financial services group. LKP Securities is a Non Banking Finance Company (NBFC) registered with Reserve Bank of India & a listed public limited company having a networth of Rs.142 crores as on FY10. They are India's first financial group to be awarded the prestigious ISO 9002 certified KPMG Quality Registrar, USA, for certain businesses.
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