Bandhan Bank stock to face overhang in near term until clarity emerges on a succession plan: Nirmal Bang

Domestic brokerage Nirmal Bang sees an overhang in Bandhan Bank's stock in the near term after the retirement announced by its Founder MD & CEO, Chandra Shekhar Ghosh. 

As per the report with the existing leadership being fairly new to the bank and current uncertainty over succession plans, the stock will see an overhang in the near term until clarity emerges on this issue.

With an 'accumulate' rating the brokerage has given a target price of Rs 194 apiece which implies a 6.2 per cent upside from Wednesday's closing price of Rs 182.65 apiece. 

Analysts at Nirmal Bang believe that valuations are inexpensive at 1.3x FY25E P/ABV (x) and 1.1x FY26E Accredited in Business Valuation (ABV) respectively considering the projected Return on Assets (RoA) in excess of 2 per cent and Return on Equities (RoE) of 16-17 per cent.

In a letter dated April 5, 2024, Chandra Shekhar Ghosh, MD & CEO of the bank informed that he would retire from the bank’s services upon completion of his current tenure on July 9, 2024. The matter has been pending with the Reserve Bank of India (RBI) for approval.

On November 24, 2023, the Board approved another three-year term for Ghosh as MD & CEO. After retirement, Ghosh would assume the higher strategic role at the holding company level Bandhan Financial Services Ltd (BFSL), which currently holds a 39.98 per cent stake in Bandhan Bank. 

The promoter, including his family, holds less than a two per cent stake in BFSL. Ghosh is not expected to hold any position at the bank’s Board level post-retirement.

Bandhan Bank share price: Past performance

In a year, shares of Bandhan Bank have lost 13 per cent as against Nifty50's rise of 28 per cent.

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