PE moneybags chase Bandhan Bank

An upcoming bank that would get listed within the next three years has turned into a potent investment opportunity for private equity funds.

So, the smart guys from the PE funds armed with iPads and loads of cash have started paying visits to Chandra Shekhar Ghosh.

And Ghosh, who is working on country's newest bet on financial inclusion, Bandhan Bank, is also willing to hear them out. Though Bandhan has no immediate plan to bring in any PE fund.

But there is no harm in listening to them either as the bank is all set to get launched next year after which there would emerge a case for raising funds from them as the entity would start preparing for an initial public offering, Ghosh told dna.

"We need to listen to them, particularly when we plan to get listed three years down the line," Ghosh said on the sidelines of an interaction of the office-bearers of The Bengal Chamber, of which he has been appointed as vice-president.

"It is sort of a learning process for us also as most of the PE guys we have met give the success factor of a venture utmost importance. Yet, they promise to be discreet and adaptive in fitment," he said.

The decision to raise additional capital would only be decided upon when the business targets for the proposed bank are firmed up, which, Ghosh said, would happen by December.

As per RBI norms, Bandhan need a capital base of just Rs 500 crore. It has recently raised Rs 160 crore from International Finance Corp for the micro-finance business. With this and profit plough-back, its current net worth of Rs 1,250 crore is likely to swell to Rs 1,660 crore by year end.

Ironically, growth would taper off from the first year of operations, fiscal 2016, as growth rate of micro-finance, Bandhan's current business, is much higher than what would come from normal banking operations.

"While micro-finance sector is enjoying growth rate of 30%, the banking sector is growing by 15-20%. In the initial days, all our business would come from micro-finance clients. By the end of first year we plan to bring down our dependency on MF to 50-60% of the bank's business. Maybe, in the third year, we would be having a growth of what a bank now sees in terms of advances," Ghosh told reporters.

As growth tapers, costs will fall, primarily because Bandhan doesn't have access to cheap current and deposit accounts, which would only start flowing in once the bank starts operations.

With cheap CASA, Bandhan's costs of fund would come from a level of more than 12%, he said.

Bandhan's immediate priority is to develop all the internal policies and manuals that it would be following as a bank, finalise the various products that would be offered and also to train the staff.

"Next will come setting up the departments, and the relatively crucial task of implementing the software that would run the banking operation."

Ghosh has been promised by the software vendor, NYSE-listed FIS, to get the pilot software implemented within the next three-four months.

"We didn't go for any well established Indian software brands but selected FIS instead as they are strong globally in payment technology solutions," he said.

Recruitment is almost complete, taking in about 200 from around 250 selected out of 35,000 applications it had received.