Bandhan Bank is a leader in microfinance institution (MFI) with a market share of around 19 percent by loans and around 18 percent by number of micro borrowers.
Shares of private sector lender Bandhan Bank gained 4.8 percent intraday on March 5 after brokerage house Motilal Oswal initiated coverage with a buy call on the scrip, citing strong return ratios and likely sustainable growth by diversification.
"The bank has demonstrated a strong track record in growing its balance sheet/earnings and maintained a robust market share/cost leadership with its low-cost DSC network. It has also deftly handled external events like demonetization/GST, wherein it restored the normal delinquency rate within three months," said Motilal Oswal.
The brokerage estimates loan book/earnings CAGR of 26/24 percent over FY20-22, driving industry-leading return on assets (RoA) / return on equity (RoE) of 3.7/23.4 percent for FY22.
"With its share of volatility, Bandhan Bank offers a great long-term investment opportunity as the stock has corrected significantly. Valuations appear reasonable and reflect near-term risks emanating from Assam," said the brokerage which initiated coverage with a buy rating and target of Rs 500.
The merger with GRUH has helped improve product diversification, reduce concentration risk and increase cross-sell opportunities (around 68 percent of GRUH's book has a ticket size of less than Rs 10 lakh), it added.
The stock was quoting at Rs 416.90, up Rs 16.50, or 4.12 percent on the BSE at 1423 hours IST.
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