Why Bandhan Bank shares tumbled 8% today?

Shares of Bandhan Bank plummeted over 8% intraday on Thursday after the private sector lender received a muted bid for sale of group loan and small business and agriculture loan (SBAL) written-off portfolio to asset reconstruction company (ARC). The weakness in equity market also dented sentiments.

The bank has received a ₹801 crore binding bid from an ARC for a portfolio of written-off assets with an outstanding of ₹8,897 crore, it said in a regulatory filing.

"We would like to inform that pursuant to the approval of the board of directors of the bank to transfer group loan and SAL written-off portfolio to ARC, the bank has received a binding bid from an ARC, amounting to ₹801 crore, on security receipt consideration basis, for the written-off portfolio with outstanding of ₹8,897 crore," Bandhan Bank said in a BSE filing on Wednesday. 

"The bank shall go for bidding as per Swiss challenge method and decision of sale shall be taken as per extant guidelines governing Swiss challenge method and the relevant Policy of the Bank," it added. 

Following the announcement, Bandhan Bank share price opened higher at ₹247.30, against the previous closing price of ₹243.05 on the BSE. However, the stock lost momentum and declined as much as 8% to hit an intraday low of ₹223.55, before settling at ₹231.70, down 4.7%. In comparison, the BSE Sensex ended 241 points lower at 60,826 levels, while the BSE Bankex dropped 0.44%.

Bandhan Bank management had earlier announced to transfer group loans and small business and agro loan written-off accounts to asset restructuring companies to clean its balance sheet. The bank plans to conduct the bidding process on a Swiss challenge method, wherein private firms and individuals can submit a bid to an authority without any invitation. Under the Swiss Challenge method of bidding, the highest bid placed in the first round of auction becomes the base price for other bidders before the second round of auction.

At the end of September quarter of 2022 (Q2FY23), Bandhan Bank had group loans of ₹38,200 crore, while SBAL assets under management stood at ₹15,700 crore. The gross non-performing assets in the group loans category were at 12%, while gross NPA in the SBAL segment stood at 4% during the quarter under review.

For the July-September quarter, the Kolkata-headquartered private sector lender reported a net profit of ₹209.3 crore for Q2 FY23, compared with a loss of ₹3,008.6 crore in the same quarter last year. Sequentially, the profit dropped 76.4% from ₹886.5 crore in June quarter of this fiscal (Q1 FY23). The net interest income (NII) stood at ₹2,193 crore, up 13.3% year-on-year (YoY) from ₹1,935.4 crore reported a year back. On the quarter-on-quarter (QoQ), the NII declined 12.8% from ₹1,935.4 in June quarter.

Recently, YES Bank concluded the sale of ₹48,000 crore stressed asset loan portfolio to JC Flowers Asset Reconstruction company through the Swiss challenge process, which is touted to be the single-largest sale of NPAs in India. In June this year, the private lender decided that the JC Flowers ARC would be the base bidder for a proposed sale of an identified stressed loan portfolio of the bank.