Bandhan Bank Ltd rose as much as Rs 498.40 on its trading debut on Tuesday before closing at 477.20, with a gain of a whopping102.20 points or 27.25 per cent on the Bombay Stock Exchange. Bandhan Bank led a $691-million (Rs 4,475 crore) initial public offering, a rare bright spot in a volatile market that has led to companies struggling to find takers for their share sales. Investors are betting on Bandhan - a former micro lender which was one of two companies that won bank permits from the Reserve Bank of India in 2014, the first new bank licensing process in a decade - for its low-cost model, high margins and niche clients.
The listing came against the backdrop of two major IPOs failing to be fully subscribed in the past week. On Monday, brokerage ICICI Securities, a unit of third-biggest Indian lender ICICI Bank, was forced to scale back the size of its IPO that raised a lower-than-targeted $540 million.
Bandhan Bank's IPO, the biggest for an Indian bank, had been subscribed nearly 15 times, mainly driven by strong demand from institutional investors.
By 11:20 am, the shares were trading at Rs 478.70, 27.7 per cent higher than the IPO issue price of Rs 375. The stock rose to a high of Rs 499 on the National Stock Exchange.
"We had a target of 500 rupees over a 12-month horizon but that got delivered in 12 minutes," said Digant Haria, a financial sector analyst at Mumbai brokerage Antique Stock Broking.
"Bandhan is a leader in the micro-finance space and has been able to improve its scale of operations as well as profitability. Its low cost to income ratio versus other banks and micro-finance peers also is a positive," said Mr Haria.
Kolkata-based Bandhan, whose shareholders include Singapore's GIC, has relatively fewer bad loans than most of its rivals, and has a net interest margin of close to 10 per cent that is almost double that of some of the leading private-sector banks in the country.
State-run lenders account for nearly 70 per cent of the country's banking assets and the bulk of the $150 billion worth of soured loans. A recent more than $2 billion loan-fraud scandal in second-biggest state-run lender Punjab National Bank has also hurt the lenders.
That has meant private-sector banks have expanded lending faster, and have generally been more profitable than the government-owned banks.
The IPO market saw a record $11 billion of fund-raising last year. Companies are in the process of raising a combined more than $2 billion in IPOs in March, but the weak response to some recent offering was seen as a setback.
State-run Hindustan Aeronautics Ltd, whose offering was 99 per cent subscribed despite heavy investments by state-run insurer Life Insurance Corp, is scheduled to begin trading on Wednesday.
($1 = Rs 64.7550)
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