Bandhan Bank Ltd’s main shareholder sold ₹10,600 crore ($1.4 billion) of its stake in India’s most profitable bank to meet the regulator’s ownership rules. Bandhan Financial Holdings Ltd sold 337.4 million shares in the Indian lender at ₹313.10 in a block trade on Monday, according to deal teams seen by Bloomberg News. The company’s shares plunged 11 per cent to ₹307 rupees at 11:21 am in Mumbai, heading for the biggest loss since March 30.
The latest sale helps founder and Chief Executive Officer Chandra Shekhar Ghosh cut his stake to 40 per cent from 60.95 per cent, according to data available as of June.
The RBI imposed restrictions on branch expansion by Bandhan Bank, which specialises in lending to small borrowers, after it failed to lower its stake to 40 per cent last year. Bandhan Bank then agreed to combine with mortgage financier Gruh Finance Ltd in a $11.7 billion deal to pare the founders’ stake as mandated, following which the central bank partially relaxed its curbs on the lender.
The RBI is very clear that shareholding in private banks should be diversified as it reduces concentration risk, Karthik Srinivasan, group head, financial sector ratings at ICRA Ltd, the local arm of Moody’s Investors Service. The urgency of stake sale by Bandhan founders shows that the RBI is on its track on its rules regarding shareholding in private banks.
The central bank is currently reviewing its norms on shareholding in private banks, which stipulate founders cut their stake to 15 per cent, as it aims to improve corporate governance in a sector plagued by bad loans.
Some of Bandhan Bank’s profitability metrics, including return on assets and return on equity, are the highest among Indian banks.
Credit Suisse Securities (India) Pvt., J.P. Morgan India Pvt., Goldman Sachs (India) Securities Pvt. and JM Financial Institutional Securities Ltd. are joint book-runners for the deal.