Bandhan Financial Services had received in principle approval from RBI to set up
a Bank and it began its banking operations in August 2015 with the name
Bandhan Bank Ltd (Bandhan). The bank has grown remarkably in a very short
span of time. It primarily focuses on serving underbanked and underpenetrated
markets in India (East and North East India). As on Q3FY2018, the bank’s
advances stood at `22,932cr, deposits at `25,294cr (95% of the funding mix)
and CASA ratio was at 33.22%.
High valuations underpinned by high growth potential and profitability: At upper
end of the IPO price band, Bandhan is valued at 8.3x 3QFY18 book value (pre-
IPO) and on Post dilution basis at 5x of BV. Though valuations are on the higher
side, we expect such premium valuations to persist given (a) healthy return ratio
(25%+ RoE for FY17 and 9MFY18), (b) balance sheet strength (24.8% CAR ratio,
CASA – 33.2%) and (c) experienced and focused management. Considering the
above positives, we recommend SUBSCRIBE on the issue.

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