Bandhan Bank CEO Chandra Shekhar Ghosh (File photo) (Indranil Bhoumik/Mint)
Bandhan Bank to take OFS route to trim promoter shareholding
3 min read . Updated: 03 May 2019, 12:42 AM IST Shayan Ghosh
Bandhan Bank on Thursday posted a 68% y-o-y rise in net profit for the March quarter at ₹651 crore
According to RBI norms, the bank's promoter had to trim stake from 82% to 40%
Chandra Shekhar GhoshBandhan Bank
Mumbai: Bandhan Bank Ltd plans to trim its promoter stake to 40% through the offer-for-sale (OFS) route and is not considering more acquisitions currently, its managing director and chief executive Chandra Shekhar Ghosh said.
"We cannot go for any further acquisition and the option is to have an offer for sale," Ghosh told reporters after the private lender announced its quarterly earnings.
The OFS mechanism, introduced by the Securities and Exchange Board of India (Sebi) in 2012, allows promoters to dilute their holdings in listed companies.
According to RBI's new bank licensing guidelines, the bank's promoter, Bandhan Financial Holdings Ltd, had to cut its stake from 82% to 40% within three years of commencing business. The deadline for Bandhan Bank was on 23 August 2018.
The Kolkata-based bank in January announced the acquisition of Gruh Finance Ltd, the affordable housing finance arm of Housing Development Finance Corp. (HDFC), in a share swap deal. The acquisition is expected to lower promoter holding of Bandhan Financial Holdings in the bank to 61% from 82% at present.
The deal was necessary after the RBI, in September, barred Bandhan Bank from opening new branches without its approval and ordered it to freeze the salary of CEO Ghosh. This was due to the bank's failure to meet the shareholding rules.
"RBI has communicated to us that since the bank was not able to bring down the shareholding of Non Operative Financial Holding Company to 40% as required under the licensing condition, general permission to open new branches stands withdrawn and the bank can open branches with prior approval of RBI and the remuneration of the MD and CEO of the bank stands frozen at the existing level, till further notice," the bank informed the BSE in September.
Ghosh said Bandhan Bank has been receiving requisite approvals from the authorities and hopes to get the nod from the National Company Law Tribunal (NCLT) approval as well.
"Now, we need the approval of NCLT and whenever the NCLT approval comes, we will merge the entities. However, we cannot give a timeline for the NCLT approval," said Ghosh.
Bandhan Bank had come out with an initial public offering in March 2018 which led to a fall in the promoter stake to 82.28% from 89.62%. It had a bumper listing, making it the eighth-most valuable bank, after its ₹4,470 crore IPO, the largest ever by an Indian bank. Despite the Gruh Finance deal, Bandhan Financial would still have to lower its stake further from 61% to 40% in the bank.
Earlier in the day, Bandhan Bank posted a 68% year-on-year (y-o-y) rise in net profit for the March quarter at ₹651 crore.
Net interest income (NII)—the difference between interest earned and expended—stood at ₹1,258 crore, up 46% y-o-y. Its net interest margin (NIM), a key indicator of profitability, stood at 10.7% in the March quarter, up 140 basis points (bps) from the same quarter last year and up 20bps sequentially.
Ghosh said the bank has not reversed any provision on its loan to Infrastructure Leasing and Financial Services Ltd (IL&FS) following National Company Law Appellate Tribunal's (NCLAT) decision that banks shall not classify IL&FS subsidiaries as bad loans. The bank had earlier announced that the ₹385 crore loan made to a borrower from the "infrastructure development and finance sector" had turned sour in the December quarter. Without naming IL&FS, the bank had said it fully provided for the loan in the same quarter.