Bandhan Bank share price: Debutant beats all PSUs except SBI in market cap race

Bandhan Bank share price, on the first day of listing after its IPO, turned more valuable than all public sector banks (barring SBI), following a stellar debut on Dalal Street. The Kolkata-based bank also surpassed the market capitalisation of some private sector players such as RBL Bank, ING Vysya Bank, Federal Bank and IDFC Bank, becoming the eighth largest bank in India in terms of market value. The newly-licensed commercial bank listed at Rs 499 on NSE, a 33 per cent premium against its issue price of Rs 375. On BSE the stock listed at Rs 485, and settled the day 27 per cent higher at Rs 477. At this price, Bandhan Bank quoted a market capitalisation of 56878.9 crore on the NSE, data available with database INSIGHT showed.  

Among PSBs, Bandhan Bank beat the likes of Bank of Baroda, Punjab National Bank, IDBI Bank, Canara Bank, and Indian Bank, which quoted the market cap of 33201.17 crore, 24122.47 crore, 20149 crore, 16055.16 crore and 14730.54 crore, respectively. State Bank of India (SBI) with a market cap of 219556.29 crore remained the second largest bank in the country after HDFC Bank, which held the top spot with a market value of 489434 crore.

Top 20 banks in terms of market capitalisation

Even after a bumper listing, and rich valuations against its peers, analysts are bullish on Bandhan Bank and recommended holding the stock for the long-term. 

"If you have already received Bandhan Bank shares, you should hold it. But investors, willing to buy at these levels, should wait for the stock to settle down first before taking a plunge," told Prasanth Prabhakaran, Senior President & CEO, YES Securities to Zee Business. 

"IPO market is driven by both high-networth individuals and retail investors. HNIs' leverage is usually high that comes in for selling for three-four days after listing of the stock. So, once the stock settles down, finds its base price and can be compared with its peers, only then, investors should take a call on freshly listed Bandhan Bank," he added.

At upper-end of the IPO price band, Bandhan Bank IPO is valued at 8.3 times its Q3FY18 book value (pre-IPO) and on Post dilution basis at 5 times of its book value (BV), pointed out brokerage Angel Broking in its pre-IPO note.  

"Though valuations are on the higher side, we expect such premium valuations to persist given (a) healthy return ratio (25 per cent+ RoE for FY17 and 9MFY18), (b) balance sheet strength (24.8% CAR ratio, CASA - 33.2 per cent) and (c) experienced and focused management," the brokerage added. 

Considering the above positives, Angel Broking had recommend 'subscribe' on the issue.

Bandhan Bank IPO, the biggest ever by a bank in India, was oversubscribed by 14.6 times.

Bulk of the demand in the IPO had come from institutional investors. The qualified institutional buyer (QIB) portion of the issue was subscribed 39 times. The non-institutional investor portion, commonly referred to as high-networth individual (HNI) quota, was subscribed 14 times, with most of the bids in the segment coming from 'corporates'. The retail portion, however, failed to garner much demand with the portion seeing just 1.2 times subscription.

Bandhan Bank began operations in August 15 and had a total business of Rs 48,225 crore as of 31 December 2017, through a vast network of 887 bank branches and 430 ATMs, together serving over 2.13 million general banking customers. 
      
For the 9MFY18, the bank had robust fundamentals with net interest margin (NIM) at 9.9 per cent, net interest income at Rs 2,169 crore (90 per cent of FY17), net profit at Rs 958 crore (86 per cent) along with high return ratios of 25.6 per cent RoE and 4.1 per cent RoA on an annualised basis.