BlackRock, three others buy Bandhan Bank shares worth Rs 10.6 thousand crores

By Julia Fioretti and Suvashree Ghosh

BlackRock Inc. and Singapore’s GIC Pte. bought shares in Bandhan Bank Ltd. as the main shareholder of India’s most profitable bank sold Rs 10,600 core ($1.4 billion) of its stake to meet the regulator’s ownership rules.

Temasek Holdings Pte and SBI Mutual Fund also bought shares, the bank’s founder and Chief Executive Officer Chandra Shekhar Ghosh said in an interview on Monday. GIC got the Reserve Bank of India’s approval to raise its stake in the lender to 10% from 4.9%, he said.

Bandhan Financial Holdings Ltd. sold 337.4 million shares in the Indian lender at 313.1 rupees in a block trade on Monday, lowering its stake to 40%. The sale took place at a 9.3% discount to the previous closing price, according to deal terms seen by Bloomberg News.

Bandhan Bank’s shares plunged 10.5% in Mumbai on Monday after the transaction, its biggest loss since March 30. They were up as much as 2% on Tuesday.

The central bank had restricted branch expansion by Bandhan Bank, which specializes in lending to small borrowers, after the founding firm failed to lower its stake to the target 40% last year. Bandhan Bank then agreed to combine with mortgage financier Gruh Finance Ltd. in a $11.7 billion deal to pare the founder’s stake as mandated, following which the central bank partially relaxed its curbs on the lender.

“RBI is very clear that shareholding in private banks should be diversified as it reduces concentration risk,” said Karthik Srinivasan, group head for financial sector ratings at ICRA Ltd., the local arm of Moody’s Investors Service. “The urgency of stake sale by Bandhan founders shows that RBI is on track on its rules regarding shareholding in private banks.”

After the latest sale, Bandhan Financial will need to lower its stake in the bank to 20% by August 2023, Ghosh said, citing RBI rules. He said his personal stake in the holding company is 2%, with the rest held by GIC, International Finance Corp. and others.

The holding company aims to use the proceeds to start new ventures in areas such as insurance and asset management, subject to RBI’s approval, Ghosh said.

The central bank is currently reviewing its norms on shareholding in private banks, which stipulate founders cut their stake to 15% eventually, as part of its efforts to improve corporate governance.

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., JPMorgan India Pvt., Goldman Sachs (India) Securities Pvt. and JM Financial Institutional Securities Ltd. are joint bookrunners for the deal.