Bandhan Bank gets fund commitment from GIC, IFC

The soon-to-be launched Bandhan Bank has firmed up equity infusion totaling Rs 1,600 crore from International Finance Corp (IFC) and GIC, Singapore's sovereign wealth fund, thus completing its effort to bring in outside strategic investors.

While IFC would be putting in Rs 580 crore, GIC has committed to invest Rs 1,020 crore.

The combined holding of these two entities would be more than 50% of the bank's capital, which is expected to start operations with a capital base of Rs 3,200 crore including earlier investments by IFC.

"By bringing in two reputed global institutions as investors, Bandhan would be able to gain confidence of its customers as well as all those institutions which are currently involved with us and would get involved in future as we make a new beginning in the banking sector. This completes our equity fund raising initiative. We plan to launch the bank in coming months with an equity base of Rs 3,200 crore," Chandra Shekhar Ghosh, chairman and managing director of Bandhan, told dna.

While IFC, an exiting investor into the parent Bandhan Financial Services (BFSL), is holding 11% stake before the current round of fund infusion, GIC, with over $100 billion of assets in 40 countries, has been taking equity exposure into the Indian private sector including realty.

The World Bank arm is investing Rs 580 crore in total in the parent micro-lender Bandhan Financial Services as well as the bank being promoted by it, IFC said in a disclosure.

While IFC said it is separately investing in the two entities - the micro-finance firm as well as the proposed bank - Bandhan will merge the two entities going ahead.

IFC said it would assist the first of the new generation banks to emerge as the finest micro, retail and SME banking platforms in the country with specific focus on the country's under-banked population.

The decision to invest in Bandhan will be taken at the IFC's board meet to be held on February 2.

"IFC proposes to acquire minority equity stakes in BFSL and Bandhan Bank for an aggregate investment of up to Rs 580 crore in both entities," IFC said, adding that the investment underlines the faith in the sustainability of the newly formed bank and attract other investors.

Bandhan Bank has been planning to start operations in April this year, though the final date is yet to be fixed.

Ghosh refused to disclose how much stake IFC and GIC are picking up in the proposed bank on the grounds that it would indicate the valuation the bank has received.

With the fund infusion, the Washington, US-based multilateral funding agency will help Bandhan become a bank by sharing best global practices in corporate governance, product design and other key functional areas such as treasury management and risk management, it said.

"This project will promote a more balanced growth of micro-finance in India by increasing access to savings services for low income households and enable a wider range of credit products which could increase asset creation and job creation through higher ticket loans for scaling up businesses and increase access to housing and education finance," IFC said in its disclosure associated with funding proposal.

Bandhan was founded in 2002 by Ghosh and subsequently transformed into a non-banking finance company. Apart from Ghosh and IFC, other key shareholders include Financial Inclusion Trust, North Eastern Financial Inclusion Trust, Bandhan Employees Welfare Trust and Small Industries Development Bank of India.

As on December end, BFSI had a loan book of Rs 7,810 crore with disbursement to 61.52 lakh, mostly women borrowers, serving through its 2,022 branches spread across 22 states and union territories.