Bandhan Bank shares fall 4% as Assamese protesters seek a ban on microfinance companies

Our Bureau Chennai | Updated on November 19, 2019


Shares of Bandhan Bank tumbled over 4 per cent in early trade on Tuesday on news of some women protesters in Assam seek a ban on microfinance companies. The stock is hovering around ₹535.

According to media reports from the northeast, several organisations under the banner of Jagrata Mahila Suraksha Samaj staged a protest against microfinance companies which they alleged had ruined the rural economy.

The Samaj demanded that these microfinance companies should be banned from operating in Assam.

According to analysts, Bandhan Bank is the most significant player with an asset base in Assam. Analysts say over 15 per cent of its total AUM is catering to Assam.

Alleging that these companies were charging exorbitant rates of interest on loans and that their accounts checked for malpractices, they said the extra interest which had been collected should be returned.

According to JM Financial, "Recent news flow also suggests protests against microlenders in Assam (initially reported end October 19) where Bandhan has nearly 350 Doorstep Service Center (in 29 out of 33 districts in Assam) and in our view forms nearly 15-16 per cent of the microloan portfolio."

The broking house further said that its channel checks suggest that the issue was severe around two weeks back – primarily in one district of Assam (Dibrugarh) – and since then has seen its intensity diminish. Bandhan’s On-time Repayment Rate in Assam currently stands 98.5 per cent (and 99 per cent excluding the 11 impacted DSCs), the broking house added.

Management indicated that collections are already back to near-normal and it expects full normalcy within the next couple of weeks. Management believes that this is not a material event and drawing from similar past experiences and the strong customer connect that Bandhan enjoys, they have invariably seen turnaround in 3-4 weeks time.

"We continue to like Bandhan for strong track record on profitability, asset quality and efficiency. In our view,Bandhan has a strong growth runway and the Gruh merger gives it a much-need diversification while ensuring stability and compliments the business model. Maintain buy with a target price of ₹710," added JM Financial.

Published on November 19, 2019

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like