So much informative. Look for Synergies between Gruh and Bandhan slides. Very interesting. I feel this is marriage of East and West for better India.
Very good result indeed. Merger would bring the whole new housing sector to the books.
Does anybody have call in details for results concall today at 4pm? I did not not see call in numbers in the notice to BSE. hence asking…
Couple points from investor PPT →
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Opportunity size in next 5 Years for MF:
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How they have placed ex-Gruh Management inside Bandhan → looks good.
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Some people raised concerns on rise in loans in West Bengal. They seem to have clarified on the reality.
- Almost all return rations are Industry Leading.
Comparison with competitors. Bandhan leads in most ratios.
Bank comparison Q2 2020.pdf (184.0 KB)
YoY comparison should be done after taking into account GRUH merger and tax rate change. Last year same quarter Bandhan PBT was 750 Cr and GRUH was 146 Cr, so total PBT was 896 Cr. So, compared to this current quarter PBT of 1,161 Cr, YoY PBT growth is ~30%.
Disc: Bandhan is my top holding
The Board has further considered and approved the proposal for increase in the shareholding limits for Foreign Portfolio Investors (‘FPIs’) and Foreign Institutional Investors (‘FIls’) from 24 % to 49% of the paid-up share capital of the Bank under the overall permissible foreign limit in the Bank of 49% of its total paid-up share capital. The proposal has been approved by the Board to have sufficient headroom for the FIls and FPIs holding to facilitate further dilution of the shareholding of the promoter of the Bank i.e. Bandhan Financial Holdings Limited from current 60.96% to 40% to comply with the requirement of the Guidelines for licensing of new banks in the private sector read with the licensing conditions for the Bank. The Board has also recommended the aforesaid proposal to the shareholders of the Bank for approval by way of special resolution through postal ballot.
The update on amalgamation process : Gruh shares converted to Bandhan shares have started crediting in demat accounts. As mentioned in Bandhan presentation, the amalgamation process was one of the fastest in history. This also shows strength of internal functioning of resources in Bandhan & kudos to management for ensuring smoothest successful closure of process.
4e62a6c7-d4ad-442d-a6da-877e9711f68d.pdf (767.5 KB)
How to understand this and how this would be accomplished ?
from the stock exchange filing.
In order to comply with the aforesaid provisions of the BR Act, the Board of Directors (the
‘Board’) of the Bank at its meeting held today, i.e. October 24, 2019, has decided to seek the
approval of Shareholders’ by way of postal ballot, to reduce the authorized share capital of
the Bank from Rs. 5200,00,00,000 divided into 520,00,00,000 equity shares of Rs. 10 each to
Rs. 3200,00,00,000 divided into 320,00,00,000 equity shares of Rs. 10 each by cancelling
shares, which at the date of passing of the resolution have not been issued, taken or agreed
to be taken by any person and diminish the amount of its authorised share capital by the
amount of Rs. 2000,00,00,000 representing 200,00,00,000 equity shares of Rs. 10 each and
consequently, the relevant amendment to the clause V of the Memorandum of Association
of the Bank.
Disc: 7% of PF Invested in Gruh and waiting for credit to demat as Bandhan.
its just reduction in authorised capital… will not affect any share holder… authorised capital means the number of shares a company can issue without shareholder approval / amendment in articles of the company or in other words, the company has already taken approval to issue 200cr shares further, which since the company is not interested in issuing any more… it wants to cancel the provision…
“Micro-management” is a fancy corporate term that does not really tell anything. A successful CEO, who has grown this bank from grass root to this level will know significantly more than an average middle manager. In early days, Bill Gates reportedly memorized every car number to know who is in office. Warren Buffet reportedly goes through 100s of statistics about his businesses. Jeff Bezos is reportedly intense. Steve Jobs paid attention to detail (positive way of saying micro-management?) - imagine CEO of the company deciding the user interface of calculator program. All these companies are massively successful! I would look at their numbers. The numbers will speak louder.
Nice to see the CEO still working on ground level when he says that he travelled across without introducing himself as he wanted to know what is ground reality rather than sitting in CEO’s AC chamber and going through reports. On opportunity front he sees that his customers are now looking towards mobile phone, fridge, TV etc… If he read it correctly he has huge market waiting for him … incidentally Bajaj finance’s growth came from similar products including other home appliances.
Replying to the question on slowdown, Bandhan CEO says…In the last two months I traveled in the east to south at the ground level without introducing my name to see for myself what is happening. I found that people are not worried in the rural areas. In the first two quarters, we always see a slower credit growth and it picks up in the third and fourth quarters which is normal. My advances have grown 37.7% in this quarter while micro credit has grown 35%, which shows rural areas are solid. Demand is increasing but supply is not there because there is still a paucity of credit network. People’s demand is also diversifying and they are looking at lifestyle products like mobile phones, fridges and TVs, so there is an opportunity.
In the whole of last year, Bandhan had 23 lakh micro credit borrowers and this year they have added 10 lakh customers in one quarter.
All looks so well with Bandhan. Top class in almost every parameter. Even the opportunity size they mention in investor ppt is 7-8x in next 5 years. Is there anything to worry about or to be careful about for a Bandhan investor?
Dear Vishal,
I agree with you, mrai and many more. All looks good for Bandhan, and that scares me. Let me try to be devil’s advocate
1- Gruh and Bandhan have just come together, and there is ‘still’ possibility that leaders of these two companies would not be able to adopt each other. This potentially could have impact on the sustenance of well being of the merged entity and growth.
2- MFI is still big part of the business for Bandhan, which unfortunately is very risky business. True that Bandhan has done exceedingly well in the past but the inherent risk with the industry remains.
3- I don’t think Bandhan is one man show, but at times it does appear like that. At some point in near future the top leader would change, and so the succession planning is important.
4- High promoter holding has to come down. Not sure it would have a negative impact on company performance or stock, but it is an overhang.
Don’t kill me for calling out these risks 
; like I said I am just trying to tease the possible risks.
Regards,
Krishna
Hi Krishna,
Very well put, I agree with them. Thank you. You always do great insightful posts be it any forum.
Regards,
Vishal
And the high valuation which leaves limited margin for error in execution.
I believe the risks you mentioned are good ones.Below are my thoughts against each risk
1- Gruh and Bandhan have just come together, and there is ‘still’ possibility that leaders of these two companies would not be able to adopt each other. This potentially could have impact on the sustenance of well being of the merged entity and growth.
If they continue with their time tested around 2 decades of lending behaviour(Growth, underwriting skills and Collections etc), they should do good as per my understanding
2- MFI is still big part of the business for Bandhan, which unfortunately is very risky business. True that Bandhan has done exceedingly well in the past but the inherent risk with the industry remains.
Its valid Point and will remain all along but with Merger, their East side of India concentration risk has actually reduced which was a major issue in case of Repco homes(TN) as an example earlier.
Also, the pyramid which they address are better being served by players like Bandhan instead of local with almost 1.5-2% per month interest
3- I don’t think Bandhan is one man show, but at times it does appear like that. At some point in near future the top leader would change, and so the succession planning is important.
Its Future risk but as long as they get a good leader and culture(most important to me) remains intact, should do well. Its similar situation like HDFC Bank has currently
4- High promoter holding has to come down. Not sure it would have a negative impact on company performance or stock, but it is an overhang.
Its wait and watch as per CEO as per earlier focus on merger with Gruh and we need to be watchful of what they do with next
Other risk being mentioned by Amit
And the high valuation which leaves limited margin for error in execution.
- If Growth falters and NPA rises then this generally plays out with Valuation compression as per trends seen in various known scenarios be it PSU Banks, RBL Bank, Repco Home finance etc
This becomes more sensitive if we have a quick look on frequent resignations of senior management team members in Bandhan. I understand that CEO is well aware of this & should create working atmosphere where other proven experienced professionals can be leveraged to deliver maximum output. During recent interviews with media, he has hinted that Gruh team will get free hand to run the business. Let us hope he walks through the talk.
Further update is that credited shares pursuant to the Scheme of Amalgamation of GRUH Finance Limited into and with Bandhan Bank Limited will start trading from 30/10/2019.