Bandhan Bank Meets RBI Ownership Norms After Promoter Stake Sale

The $3.2 billion merger between Bandhan Bank and Gruh Finance was the biggest M&A deal struck in the first quarter of 2019.

Written by
Hormaz Fatakia
Written by

Hormaz Fatakia

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Bandhan Bank Ltd. said it's now in compliance with the regulatory ownership norms after its majority shareholder sold stake in the Kolkata-based microfinance lender-turned-universal bank.

Promoter Bandhan Financial Holdings Ltd. sold 33.73 crore shares, or 20.95% of its holding, bringing down its total stake to 40% of the entire paid-up voting equity capital of the bank, according to an exchange filing.

The sale of close to 34 crore shares, executed in 27 large deals, was worth Rs 10,600 crore, or $1.4 billion, according to the term sheet accessed by Bloomberg. That was at a discount of 9.3% to Friday's closing price.

CS Ghosh, managing director and chief executive officer at Bandhan Bank, said the stake sale has brought down promoter shareholding to 40%, in compliance with the Reserve Bank of India's guidelines. "Hopefully, the RBI will remove the freeze on CEO pay hikes. The board of the holding company will decide on how to use the funds they have collected through the sale," he told BloombergQuint. "According to the RBI guidelines, they are permitted to start businesses like insurance and mutual fund, but that is the holding company's board's decision."

In September 2018, the Reserve Bank of India had placed restrictions on Bandhan Bank as it failed to lower promoter holding to meet the cap prescribed by the banking regulator. The private lender was unable to bring down the shareholding of the non-operative financial holding company to 40% from more than 80% within three years of starting operations.

The regulator, however, lifted some restrictions after Bandhan Bank's acquisition of housing financier Gruh Finance Ltd. from HDFC Ltd. in December 2018 lowered promoter holding in the microfinance lender to 61%, still above regulatory requirements.

Shares of Bandhan Bank had fallen the most in more than four months after the stake sale. But the stock pared some of the losses to close 10.5% lower at Rs 308.80 apiece. That compares with a 1.57% drop in the Nifty 50 Index.