ValuePickr Forum

Bandhan Bank - in a sweet spot?

It’s a subscribed write up.based on contents, you could mention the main points

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Yes you are right on Assam

I am not sure of WB. I have seen multiple elections in WB from my school days, elections are sometimes violent but not violent to disrupt day2day public life. Also this is State , not Panchayat eleciton

I am more concerned with Assam where Protests are still continuing. I have seen how family members got affected during Assam Agitation days in 1980-85. Any Agitation with Social Protest, connected with human emotion, will like to badly affect day2day life

Bandhan has to reduce dependence on WB and Assam, but its’ not easy. These 2 states are 60% of its business now as per latest Q3

Excellent and honest management but people who r invested in MFI, has to bear volatility in Price from time2time


Some points to add from my Concall understanding

CAA and Assam

  • No OTR dip outside Assam
    14.2 lac total customer in Assam out of 10.5 M total Customers

  • 93.5 OTR in Assam end of DEc and improving.
    Come to know every week, weekly collections
    Conservative side Provisioning done based on OTR
    No need to take any extra provision in Q4 and
    as for current situation OTR rate, provisions could also be written back in next quarter

  • 30dpd 556 Cr. Sep 384Cr.
    172 Cr. increase - 162 Cr. in Assam only

  • 200 Cr. provision (3% of Assam book - 6500 Cr.)
    162(assam) 30dpd + OTR rate + on field customer interaction,
    reversal on provision possible

    • its net to net provision no haircuts, overall
      book loss expected in worst case
    • customer behaviour is not changing , just that due to bandh
      or agitation or curfew on a particular day the group meeting
      on the day does not happen and customer is not able to pay
      and next day the ratio improves, thus the provisioning is enough
  • in current scenario, day by day collection is improving,
    once people movement comes to normal this will all settle down

  • 1474 Cr. total deposits from Assam

  • OTR in WB still 98% (45% book) + since 19 years. deep experience
    PErmonth Income avg. Rs. 38,000 of ppl in WB
    Banks are giving 6 lakh loans, we are giving only 1 lakh
    very strong risk team, process, not worried
    working on ground level, emphasizing on experience of the team,
    customer loyalty intact and satisfied

  • lowest otr even on curfew date was 78%

  • Process improvements introspection

  • 13 yrs sole lenders in Assam

  • in last 3 yrs other lenders entered

  • in last 1.5 yrs we heard the noise

  • no process changes, thus we are just more conservative now,
    our process and systems are robust

Operation Process

  • Ensure KyC and Citizenship Process
    avg. age of customer in eastern region is 6-7 yrs, he is
    already qualified as a citizen

  • Now onboarding strictly on KYC,
    Customer Acquisition still healthy at 20%

  • total MFI growing 30% and WB growing 15%

Overall customer leverage- process ensuring
Clean data ensuring

  • Indebtness all customers on Credit bureau,
    Every customer is on Bureau,
    but the problem is that the Money lender is not
    on bureau
    Only reliable source is 1 hr meeting with customers
    every week, no data process involved,

probability of risk becomes high
gather info bt customer from both formal and informal sources but still it is a blind spot


  • Responsible lender in practise with lowest interest rates of
    17.95%, ensuring best value to customer --> works for them
  • strict 1 customer 1 loan policy, only size increases
    once you mature through loan cycles - ensures granularity

So, overall they will be better survivors

Retail Liability
Primary A/C, 4.5 yrs Mass market retail assets
slow. hinders cross sellability.
Float CASA but not cross sell CASA

Much deeper penetrated in rural and semi urban and a lot of
MSME type value accredition for older customers
5-19yrs with bandhan (50% customer base of MFI)

GRUH NPA changes
82 Cr slippage

41Cr. attriutable to A/C recognition change
- NHB til sep: reporting day DPD
	- pf beyond 90 days - NPA
- Banking :after sep
	pF beyond 90 days -NPA
	even if it comes back to 60 dpd or 30 dpd 
	still classified as NPA

Gruh business momentum

- Integration still WIP from Oct 17th 2019
- Compliance and NPA compliances in progress
- 3-6 months normal growth trajectory to follow
- Focus is on gathering the momentum now

I have gone through both the concalls posted above.let me day that I am not an expert on concalls analysis and banking. It appears to me from concalls that situations is not that bad and would improve in 1-2 quarters. Would request senior boarders well experienced in these fields to share their opinion.

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I listened today to the concall and went through the notes posted above which capture almost all the relevant details.

My impression is that a lot of recency effect is reflected in stock price. The issues in Assam are fresh in everyone’s minds and we are wired to extrapolate things into the future.

In the concall itself, management said that if situation remains as it was in late December, then the bank is past its worst phase in assam, and no more provisions may be needed.

There has been some effect of 41 crores due to change in accounting policy for processing fees which earlier were amoritised over the tenure of loan but now since all high cost loans of gruh are replaced by funds from bandhan, the amount has to be paid off now as the loans are retired.

Ex of gruh numbers, loan book growth is to the tune of 33%, which in current scenario seems good. NIMs which went down below 8% are likely to come back to 8% plus from next quarter onwards.

All throughout the concall most of the questions raised were regarding Assam situation and further provisions if any going forward.

Bandhan remains one of the long term structural growth stories which is likely to grow in the range of 25-35% CAGR for next few years but it might continue to be plagued with issues like agitation, violence, rural stress and so on and so forth. Long term investors should focus on such opportunities to acquire the stock when newsflow is negative but chances of long term story getting affected are low.

Not invested now but it remains in my watchlist.


Thanks a lot for responding with a detailed balanced view.

Encouraging for many of us to see your interest and assessment @hitesh2710 bhai. Few Qs if you dont mind answering

  1. Are you able to assess Gruh( home loan) side of biz future growth - most of analysis and con call discussion has been around MF biz and short term issues. Does HFC story take a back seat compared to MF potential
  2. How would you compare BB vs Manappuram or Muthoot - why should BB command a higher PE even if most of folio is unsecured and prone to many sensitivities - does growth prospects gets highest weightage in valuations( like Bajaj fin a another story built on similar lines on unsecured cons loan at very high growth + demonstrated asset qlty control). Or rather which of these at current valuations would you pick/allocate for mid to long term - your rationale and thought process will help.
  3. Now that you have BB in your watchlist - how and when you start to nibble it or it is based on next 1-2qtr developments - from your other responses I gather you like to load on way up once bottom is found - trying to understand how would you go about it to if you planned rs X to allocate. A high level mental roadmap/milestones to allocate over time yet deploy effectively to get solid avg cost.


Have BB in my PF from Gruh conversion. Small allocation currently.


I have 2 questions. please pardon if they are too basic:

  1. Is the Provision shown in the report inclusive of 200cr special provision mentioned?
  2. how is PAT 165% if 200cr provision not considered? --> i think it should be 181%. Isnt it?
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for your 1st question : Yes
For your second question you are adding 2 billion to PAT thats why you are getting 181%. Remember provisions are before tax.

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  1. I think once integration of gruh with bandhan is done and initial teething problems are over, Gruh should be a big booster for Bandhan. Consider the experience of GRUH in housing finance and the cheap funds and geographical reach of Bandhan. If executed well this makes for a potent combination for profitable growth.

  2. Bandhan vs Manappuram vs Muthoot is not an apple to apple comparision. Mannapuram and Muthoot address a very niche segment of the lending space. Its secured lending but question is how many people in the bottom of the pyramid who need loans have access to gold? Gold loans probably accounts for a very small portion of overall lending and therefore there will be a limit to the kind of growth these companies will show. In case of Bandhan, the runway seems quite long. As of now I dont hold any of the companies in lending space but if I want to invest in a company for the long term, I would prefer to invest in companies having short term temporary problems than in a company where everythign is rosy and hunky dory.

  3. Bandhan remains in my watchlist and after listening to the concall I got the comfort that things may not be as bad as it appeared originally. As you said, I prefer to see a stock consolidate in a tight range or form some sort of bottom and then think about investing. In my case, buying is done usually quickly once I feel the time is right to buy. I am not a person who tries to nibble small bits as I dont have that patient mindset. A quick look at screener shows that based on PE basis, the stock price is at its cheapest level since listing. And if one draws a trendline joining the bottoms since listing, Bandhan seems well placed on the trendline. Idea is to get in at levels where the risk of getting burnt are low.


Thanks @hitesh2710 bhai and amazing clarity of thoughts. Totally agree on opportunity size and runway. BB have potential to do ( PAN india level) what Bajaj fin did in consumer financing space over last 10 yrs, for mid term - tailwind supporting as well, if India has to get to $5Tn or there about, govt has to push lots to this market segment and what can leverage it better than microfinance org built by ground up entrepreneurs.

Fintech/ P2P platforms as well as NBFC with microfinance focus( gold loan companies like Manappuram with Ashirvad microfinance) also aggressively pushing but Bandhan will have a serious cost advantage as well as some baggage with RBI restrictions on Banks - they are leader in North east but expansion in other geo is where growth will chart the direction for growth.

A worthy candidate in 25-30% growth bracket.


Seems it will add to already bad phase for bandhan

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I have some conerns may be some can sort this out
• Two elapsed years’ and management has not complied with the reduction of stack to 40% and in response to that RBI has slapped them fine twice. The management has said in past that they will reduce the stack by inviting FDI and increasing FDI from 24 to 49% but yet not has concrete step taken .

• The customer are small individual and the loan spread is more and in order to collect the recovery more effort required that way they are remained in touch to ground reality but at the same time the faulty defaulters who has not paid the old loan may demand for raising future extra size of loan but i long term it may cause a rise in NPA

• The major revenue which can be come from the card holder is going to Standard chattered but at the same time the credit risk is covered by the standard bank it is very fruitful in initial teething period ( thanks @hitesh for coining such a good term ) but may losing the control over the high worth customers . In IT it is termed as platform leak . Because Sharing of account details may derail the growth.

Disc : tracking but not invested Yet . this is not an recommendation to buy sell or hold

I see the promoter holding has reduced but not to the limit mentioned by you till december quarter

  • Management has clarified on numerous occasion that they are working on reducing the stake to ~40%. After lot of deliberation that they merged with Gruh Finance and the stake has come down to nearly 60%. They need to go for some more M&A or other methods to reduce the stake. Its a long process and it will be a burning issue for them as they keep on getting fined from RBI. This issue will keep stock under pressure.

  • Regarding Individual loan recovery: In small villages/town people still fear for public shaming if they don’t repay the loan.Quoting from my experience of these Small loan vendor, I see people usually pay the amount due to shaming in society. If a loan recovery agents visit your place means its considered as some kind of shaming. Its rather easy for banks to recover from general public than these big defaulting big corporations.

Disclosure : Holding Bandhan bank. Will add more if goes below 400.

Management saying should be taken a pinch of salt , what they do and how they report the numbers and in what manner they at showing you the number matters a lot .That is reasons we can’t take 100% grantees what they are talking .But what does matter is do they walk what they talk In past they were aiming to take stack in PNB Housing but that deals does not get materialised .They want to grow and expand their playing field from just eastern players to expand their reach . nothing wrong in that but one must adhere to the policy of the regulators it might be IRDA in insurance or SEBI in listing and in this case RBI .

My take is when you are not taking seriously the two notices ,i being in the taxation department we give enough opportunity of being heard and if they still not make compliance warranted under the act the parties are prosecuted as per the provision of law . and if that happen it will lost the reputation and as we all know the sentiments plays a vital role in the stock market . People remember 1% bad things and they forget all the 99% good deeds and Mr market is very ruthless in that . I may be wrong in my perception or my understanding of the things.

in the context of micro lending my take is that the time and efforts they took to recover the due will be more however they have very well placed as they are lending to groups mind not self help groups but a small group and based on the guarantee of the group they pass the loan without guarantee / without collectoral security.


Valid concerns as per regulatory norms but do we have any historical precedence punishing the defaulter. I do observe similar issues with other listed companies where promoters don’t act in the prescribed time frame… either they wait till 11th hour or sometimes even get penalized. As the penalty is very small, they really don’t bother about this. In this case they got 36 months to comply with but didn’t… maybe despite enough genuine efforts (better known to management as shareholders are in dark till the action is visible in black & white)

sirthis may sound insane before DHFL none of the NBFC has taken in to NCLT It doesn’t has a compelling reason to take it guaranteed that nothing can happen . Sometime judgments are made and after that it became a rule that everyone follow thereafter . I am agree with you that there is no such happening in past . so my humble query why SIDBI being insider stack holder is selling the It’s stack in the bank ?
secondly because of NRC and other matter North-eastern states and boarding states have more cross boarder migrants labours ( bengal & assam being dominantly operational area of the company ) who generally are not economically strong and seek small loans Isn’t this cause another concern on NPA from unorgainised workforce ?

On promoter stake dilution - shouldn’t same yard stick apply to Kotak and DMart( nearing deadline , kotak is in tussle with SEBI…)- both are considered gold standards.

IMHO - microfinance is one of the segment with long runway, in addition to others such as insurance and chemicals etc. Bandhan has been volatile with some or other event almost since listing - mkt needs time to build faith and some short term issues to subside…

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I see some misconception on how Bandhan Microfinancing works in above posts so writing down my recent interaction with my domestic help didi who is a micro-loan customer of Bandhan.

A lot of discussion surfacing on NPA topic recently. NPA comes when people turning defaulters. But in this case probability of turning defaulter is very less. This lending process works through SHG(Self help groups). They have a SHG of 35 members(in this discussed case, other groups may have less members too), they meet every Friday to deposit Cash, this is a weekly collection activity. If a single person is not able to deposit cash on some Friday then other 34 members need to arrange that money and leave that meeting place. So no question of becoming defaulter.
New people coming in group is major responsibility of other SHG members. If someone returning money properly, she will be eligible for higher loan next time. In this discussed case person got a 2nd loan with 40K higher values than previous loan.
Interest rate also reduced 2 times from 19 odd% to 17 odd %.

Now if an entire SHG is not willing to return money then there comes the problem, recently which has been seen in Assam. Before coming this NRC issue there were some other politically motivated agitation also. Where entire SHG was not willing to return money and becoming defaulters.

Disc : Tracking for long. Invested. Added more recently. Views may be biased. Not a recommendation of Buy/Sell.