We are mixing up facts here. Restriction imposed on sep 2018, then they got approval of opening 40 branches in around nov/dec 2018. Then in oct 2019 RBI imposed 1 cr penalty. Penalty and restriction on branch expansion never came hand in hand.
Not sure why this sorted out issue coming into surface after so long.
There is no mix up & both issues are NOT dependent or linked. Having said they are NOT sorted out issues, we can consider them sorted once
Bandhan gets blanket unconditional approval for adding branches
Promoter reduces their holding complying regulatory norms
Although penalty was too small (1 Cr) but the promoter was penalized once due to non-compliance. Repetition of non-compliance may force regulators to take next steps including restricting their voting rights for all upcoming board resolutions (They did take similar steps for others in similar situation). I donāt think that regulators will take any decision, which hampers business operations / growth of Bandhan. They have provided conditional approvals to add branches as well (till now only once against only request of bank)
Friends,
With BB coming back close to issue prices 2 yrs back and with a relatively decent track record across last 8 qtrs on growth - isnāt valuation attractive from risk/reward perspective!!
Market isnt recognizing it yet.
Disc - Have from Gruh conversion earlier and now started adding in last 30 days.
Sir, in bandhan bank at present equity cap is showing 1610 cr. and share capital in March 2019 showing 1193 cr. In screener.in website.Where as in many companies both parameters shows same numbers.
Please elaborate why such difference is and what does it mean in terms of bandhan bank.
Thanks in advance.
That is because of the issue of shares to the Gruh Finance shareholders due to amalgamation with the bank.
Problem in Bandhan is Supply - In market demand supply dictate pricesā¦ fundamentals come a little laterā¦ no-one can reasonable justify PE within a rangeā¦ Assam problem is(was) a minor blot. Stock supply needs to be absorbed. Who absorbs it and at what price.
In financials, price action becomes important as people start to worry when price falls people speculate - someone who knows something is selling. Hence the volatility.
CEOās interview, Assam situation is improving in terms of collection efficiency. Overall bank wide collection efficiency at 93.12%
So Assam book is 18% of the total. 93% is the collection efficiency which is at 0 dpd (NPA are at 90 dpd). Assuming the worse case scenario 7% of the assam book becomes NPA. That means 7%*18%=1.2% (approximately). Remove 1.2% from the profitability so ROA 4% - ROA 1.2%= ROA 2.8% for one year where we are still the most profitable universal bank and then back to normal profitability of 4% from next year. Really what is the problem i dont understand.
The larger concern is the 13x book paid for gruh for which HDFC agreed to sell off gruh. Most people are ignoring this fact and overdoing Assam which Mr. Ghosh shrugged off as manageable.
A high buy price for gruh is not ideal for Bandhan shareholders. promoter holding dilution was a major reason for a accepting the premium.
The opportunity remains humongous for Bandhan gruh combine, but negative from short term perspective. Lower NIMs is the indicator.
I just went through the Q3 concall transcript and I can assure you that he said the recovery is 93% and not 97% in Assam. However, it is a cause of worry if the number heās quoted are for January as it has virtually remained the same in the past month.
Because Feb results for collection, not done yet. MFI business, there will be 6-12 months of this kind of risks, that investors have to bear ,where these kind of risks r frequent
Volatility of MFI stocks will be thereā¦but in financials, you need to consider who is the jockey
2 finest guys - Mr. Ghosh and Mr. Chokseyā¦who have seen Indian Financials sectors by their teethā¦
Thanks for clearing my wrong understanding of Assam OTR. I also checked and found you are right. I have deleted post not to confuse others.
Relief for Bandhan Bank promoters?
Branch opening restrictions lifted by RBI with some conditions that Bank ensures that atleast 25 % of the total number of āBanking Outletsā opened during a financial year are opened in
unbanked rural centres.
d206cbd8-4b62-4d14-98a1-940f6614c339.pdf (707.7 KB)
Positive regarding further expansion of branches.
Disc: invested
Microfinance sector grows 26.5% y-o-y in December quarter.
Following the recent unrest in Assam between lenders and borrowers, the disbursed amount in the North-East saw a decline of 33% over the previous quarter. As a result, the microfinance book in the region shrunk by 3% against the previous quarter, while the national book grew by 8.5%.
Banks, which had been at the least risk in the previous quarter, have shown deteriorating asset quality with an increase in both 1-30 and 31-180 DPD (days past due) buckets across rural and urban geographies
With the recent increase in lending limit per borrower and household income limit for borrowers of NBFC MFIs by RBI, the microfinance sector is set to penetrate deeper into untouched geographies and to borrowers in the bottom of the economic pyramid, evident from the consistently growing customer base of the sector
With branch opening restriction lifted by RBI, there is plenty of headroom for further business growth by way of fast paced scaling of its operations in new geographies.And with GRUH having sizeable presence in the western part of India , further geographical diversification can lead to better synergies to have greater customer base with improved incremental advance sourcing.
Business update.
As a long term investor I am slightly worried about Gruh integration and Gruh starting small housing loan in Eastern india
I think microfinance is his speciality so I am not worried about Asam and related issues
(Mfi loans are small tickets ,granular, itās almost essential for customers day to day life, non discretionary in nature so less likely to default)
If someone ask about Gruh business expansion itās more helpful to me
Thanks
