Bandhan Bank completes record IPO


Kolkata-based Bandhan Bank has completed a landmark IPO on the Bombay Stock Exchange and the National Stock Exchange of India. The issue was oversubscribed 14.5 times and took place in March.

According to Cyril Amarchand Mangaldas, it was the largest IPO by a bank in the country to date and the first IPO by a bank in the eastern region.

It was also the first time a company was able to meet the profitability threshold for the IPO by using a business transferred to it. “Since Bandhan Bank as an entity has a limited operating history, it did not meet one criterion under regulation 26(1) of the SEBI ICDR [Securities and Exchange Board of India’s Issue of Capital Disclosure Requirements] Regulations, or what is generally known as the ‘profitability criteria’,” Khaitan & Co partner Abhimanyu Bhattacharya told Asia Business Law Journal.

Bandhan Bank began operations in August 2015 after Bandhan Financial Services Limited (BFSL), its parent company, transferred its entire microfinance business to the bank. At the time of the transfer, BFSL was India’s largest microfinance company in terms of the size of its loan portfolio and its customer base.

“Given Bandhan Bank’s history as a retail-focused institution, it was keen to undertake the IPO under regulation 26(1) so that at least 35% of the issue size was available for allocation to retail investors,” explained Bhattacharya.

Issuers who do not qualify under regulation 26(1) must undertake an IPO under regulation 26(2), where at least 75% of the IPO size must be allotted to qualified institutional buyers with an upper limit of only 10% available for retail investors.

Although, Bandhan Bank did not fulfil the profitability criteria under regulation 26(1), the business transferred from BFSL to the bank did. “In such a unique situation, the regulator … permitted the bank to undertake the IPO under regulation 26(1),” said Bhattacharya. “The regulator gave credence to the historical business that was transferred to Bandhan Bank. This approval was the first of its kind.”

Khaitan & Co was Indian counsel to the book-running lead managers, Kotak Mahindra Capital, Axis Capital, Goldman Sachs (India) Securities, JM Financial Institutional Securities and JP Morgan India. Working on the team with Bhattacharya were associate partner Subhayu Sen, senior associate Oishik Bagchi and associates Richa Yadav and Devarshi Mukhopadhyay.

Clifford Chance was international counsel to the book-running lead managers. The team at CAM, which advised the bank, was led by capital market partners Yash Ashar and Abhinav Kumar. AZB & Partners was counsel to the selling shareholders.