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Bandhan Bank's initial pricey offer

Does Bandhan Bank’s growth justify paying a premium over the best managed banks in the country?

India’s leading microfinance lender, in terms of size of loan portfolio, Bandhan Bank, is set to go public today. Bandhan Bank has the distinction of being the sole microfinance institution (MFI), which was granted a banking licence by RBI (June 2015), given its stellar track record on financial inclusion and robust operating metrics.

The price band for the share lies between Rs.370-375. The IPO is a combination of a fresh issue worth Rs.3,662 crore and an offer for sale of Rs.811 crore by existing investors — World Bank members, International Finance Corporation (IFC) and IFC FIG Investment Company holding 3.21% and 1.73% respectively. Post the IPO, the stake of the promoter in the firm will reduce from 89.6% to 82.3%.

The firm has consistently delivered high operating performance that manifested in a high CASA ratio at 33%, a NIM of 9.86% and a low NNPA ratio at 0.8% for nine months that ended in December 2017. But from a valuation perspective, the firm which will be valued at 5.1x P/BV, post the IPO, looks expensive compared to its peers. While the bank has no immediate peers given its uniqu

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