Bandhan Bank hits new high; stock soars nearly 100% against issue price

Bandhan Bank
Shares of Bandhan Bank have surged 7% to Rs 742 per share, their highest level since listing on March 27, 2018 on the National Stock Exchange (NSE), on back of heavy volumes. The market price of the private sector bank jumped nearly 100% against its issue price of Rs 375.

Since July 18, after the June quarter (Q1FY19) results, Bandhan Bank has outperformed the market by surging 35% against a 7% rise in the Nifty 50 index.

The bank reported a strong 47.5% year on year growth in net profit at Rs 4.82 billion in Q1FY19, on back of strong operational income. It had a profit of Rs 3.27 billion in year ago quarter.

Net Interest Income (NII) for the quarter grew by 39.5% to Rs 10.37 billion as against Rs 7.43 billion in the corresponding quarter of the previous year. Assets quality remained stable sequentially with gross non-performing assets (NPA) ratio in Q1FY19 stood at 1.26% against 1.25% as on March 2018. Net NPA stood at 0.64% against 0.58% in the previous quarter.

The brokerage firm JP Morgan initiated on Bandhan Bank with a Neutral rating on the stock.

“Bandhan’s entrenched franchise as the lowest cost loan provider in Micro finance business, ability to garner deposits (especially CASA) in a relatively short period of time and a forecast sector-high +38% loan growth CAGR over F18-21 on the back of an industry upturn are near-term investment positives,” JP Morgan said recent report.

However these are partly offset by risks on account of elevated valuations, historical credit volatility in micro lending and incremental risks building up given sustained average ticket size increases and execution risk on build out of business into new lines & geographies, it added.

“Overall, we believe Bandhan can deliver a 37% CAGR in earnings growth over F18- 20 which is amongst the highest in our Indian Financials universe. We hence think valuation premiums can sustain,” the brokerage firm said. The stock was however trading above its March 2019 price target of Rs 670.

Meanwhile, institutional investors led by foreign portfolio investors (FPIs) and mutual funds holding in Bandhan Bank increased to 16.04% in June quarter from 11.41% in March quarter. However, individual shareholders reduced their stake in the bank by more than three percentage points to 1.03% in June quarter from 4.2% at time of its listing.

At 01:25 PM; Bandhan Bank was trading 6% higher at Rs 735 on the NSE, as compared to 0.22% rise in the Nifty 50 index. The trading volumes on the counter more than doubled with a combined 3.16 million equity shares changed hands on the NSE and BSE.