Target: ₹260

CMP: ₹180.10

We recently hosted Bandhan Bank for a Non-Deal Roadshow (NDR). Bandhan is gradually reducing share of unsecured loans in the overall mix (44.5 per cent secured and 55.5 per cent unsecured currently) and will continue to pursue the strategy to reduce unsecured loans further (50:50 mix) over next couple of years.

As a result, NIMs are likely to trend lower gradually over the medium-term, though it will be offset by lower stress and possible lower drag of RIDF portfolio (₹6,500 crore currently). In our view, Bandhan’s credit costs have remained sticky and manangement believes that significant changes w.r.t to portfolio monitoring, collection focus should reduce slippages credit costs sustainably.

We believe Bandhan’s prolonged stress cycle (in the aftermath of Covid-19) has come to an end and it is moving towards more predictable growth and profitability profile. However, the change in loan mix will also mean lower profitability (than historical trends) albeit a steadier profitability profile.

Bandhan awaits outcome of the audit of the CGFMU portfolio (pertaining its claims). Also, Bandhan board has recommended renewal of Ghosh’s term as MD & CEO for three-year term beginning July 2024 and is awaiting RBI nod.

We believe while near-term stock price is likely to be guided by outcome on CGFMU audit, stock remains attractively valued (1.0x FY26e P/BV).

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