What happened to Bandhan Bank Stock? | yadnya Investment Academy

Recently, concerns are rising regarding Bandhan Bank. Also, it is claimed to be the next ‘Yes Bank’. Furthermore, Bandhan Bank is consistently underperforming in the stock market. In this blog, we will be reviewing the bank, the possible reasons behind these worries, and the downfall in the stock. Let’s Start.

Introduction:

Bandhan bank is in the microfinance sector. More than 60% of the lending book of Bandhan Bank is towards microfinance. The major reason behind the poor performance of this stock is this microfinance loan. As this bank is majorly funding to small business consistently falling due to covid situation the business is hampered. It is going through a tough time. It might continue falling in the coming quarters. But will come out of this rough path very soon.

Bandhan Bank- Uncertainties Ahead:

• Bandhan Bank provides loans to small businesses which is one of the unorganized sectors.
• This might impact this bank's business as the EMI collection efficiency will also decrease due to the lockdown situation going around.
• The majority of allocation of Bandhan Bank is in Assam and West Bengal.
• Brokerages have also raised their concerns over the bank's higher-than-expected credit costs and uncertainties lying ahead over the political promises of microfinance loan waivers.         

Decreasing Shareholding of Institutional Investors:

• The Domestic Institutional Investors that is Mutual fund and insurance sector have lower down the stakes in this bank.
• The DIIs that they were having in Dec 2020 was 4.38% now in March 2021 it was 1.91%, so the stake of DII is down by around 2.5%.          
• Foreign investors have also lowered their stakes by 0.3%. Initially, they were having stakes of 35.5% with was lowered down to 34.9%.
• Lowering down of the holdings by Institutional Investors is not a positive sign for the bank.

Conclusion:

As the rate of interest these banks are offering to attract the new customers and deposit. This might impact the net interest margins. Also, provisions need to be made as there could be an increase in the number of NPA. That’s why the stock is underperforming. If the investor believes in Bank, its business practices, and growth. Look at the current situation of the bank, it doesn’t seem to be the next ‘Yes Bank’. This stock is good for the aggressive investor as there is a fall from the all-time high of Rs. 700 to Rs. 300 odd levels but should invest only after consulting the advisors and proper research and study.