Bandhan Bank share price rises after Plutus Wealth buys stake; CLSA retains buy with 25% upside

The bank lacked management talent/depth to scale businesses beyond MFIs. It was encouraging to see new senior hires from top private sectors. In the near-term, normalisation in MFI will be the key, CLSA said.

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Bandhan Bank share price edged higher in the morning session on December 2 a day after Plutus Wealth Management acquired shares of the private lender for Rs 212 crore through an open market transaction.

According to the bulk deal data available with the National Stock Exchange (NSE), Plutus Wealth Management LLP purchased 90 lakh scrips of the company.

The shares were bought at an average price of Rs 235.65 apiece, taking the aggregate value to Rs 212.08 crore.

Also, the global research and broking firm CLSA has retained a “buy” call on the stock with a target of Rs 300 per share, an upside of 25 percent from the current market price.

“Over the medium-term the bnk’s strategy remains diversification to non-MFI categories with the company to increase exposure to states beyond West Bengal and Assam within MFI,” CLSA said.

Also read: HDFC Securities bets on these 5 smallcaps for next 2-3 quarters

“The bank lacked management talent/depth to scale businesses beyond MFIs. It was encouraging to see new senior hires from the top private sectors. In the near-term, normalisation in MFI will be the key,” the research firm added.

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At 10:17, Bandhan Bank was quoting at Rs 240.00, up Rs 4.40, or 1.87 percent on BSE. It has touched an intraday high of Rs 243.00 and an intraday low of Rs 236.

However, Bandhan Bank in an analyst meet on December 1 said that its asset quality may deteriorate further in the current as well as the upcoming quarter of the financial year. The lender told analysts that gross non-performing assets (GNPA) may rise to Rs 7,800 crore in the December quarter and Rs 8,000 crore in the March quarter, according to a CNBC-TV18 report.

The bank’s gross NPA during the September quarter stood at Rs 5,100 crore. In percentage terms, Bandhan Bank’s gross NPA remained flat at 7.2 percent, compared to 7.3 percent during the June quarter.

Also read: Foreign investors to support Indian stocks in 2023: Motilal Oswal AMC’s Manish Sonthalia

For the second half of the current financial year, the bank expects provisions to be to the tune of Rs 2,400 crore. However, after adjusting for the Central Government’s Credit Guarantee Fund for Micro Units (CGFMU), these provisions may come down to Rs 1,500 crore.

Brokerage Motilal Oswal has recommended a neutral rating on the lender with a price target of Rs 270. The firm expects Bandhan Bank’s slippages to remain elevated in the next two quarters as stressed assets formed 78 percent of the SMA book.

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