Bandhan commands premium valuations due to its superior return ratios that will sustain even after the merger with Gruh Finance, said analysts.
Shares of Bandhan Bank ended 15 per cent higher at Rs 583.40, while Gruh Finance gained 11 per cent to close at Rs 302.85.
The scheme was approved by NCLT’s Kolkata and Ahmedabad benches. Thursday (October 17) has been fixed as the record date following the effectiveness of scheme for determining shareholders of the merged entity.
After the merger, Bandhan Bank expects the share of microfinance business to come down to 62 per cent and later to about 50 per cent, and the share of housing finance business to increase to 40 per cent over the next two-three years, which analysts believe may have some bearing on its margins and RoA.
“We like Bandhan due to its remarkable liability ramp-up, asset diversification strategy and sustainably higher RoA/RoEs. The bank has a good track record of managing cyclical/external disruptions due to its strong customer connect, credit monitoring/recovery mechanism,” said Anand Dama, analyst, Emkay Global. “Key risks are slower growth/ higher NPAs in the MFI portfolio and the promoter stake dilution after Gruh merger from 61 per cent to 40 per cent to meet regulatory norms.”
Bandhan Bank announced amalgamation of Gruh Finance with the bank on January 7, 2019. As per the proposed merger involving 100 per cent share swap, 568 shares of Bandhan Bank will be issued for every 1,000 shares of Gruh.
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