The new-age Bandhan Bank which hit the bourses just five months back is setting new records to become the most expensive stock when price to book ratio of the stock is being taken into account. And in respect of its market cap it has logged a capitalization value of Rs 83,878 crore, close to India's leading private sector counterpart, Yes Bank which is far bigger than its scale.
Brief breakdown of the stock
The stock of Bandhan bank was offered at an initial price of Rs. 375 and within months of listing, the stock has made tremendous gains to the tune of some 90% to reach a current high of Rs. 703.90. Taking into account, its market capitalization, the bank enjoys eight rank when it comes to country's largest banks only next to Yes bank in the list.
What high valuations when compared to peers reflect about Bandhan Bank?
In a usual scenario, private banks and public run banks share a P/B ratio of 2.5-5.1 and 0.9-1.4, respectively, while taking into account the current market price of Bandhan Bank scrip which is close to 8.9 levels, the premium valuations are representative of the banks' promising return as well as remarkable asset quality.
Other remarkable parameters of the bank
Highest return on assets of 4% in FY18 in comparison to under 2% for most of the banks that make to the top 10 largest banks of the country.
Also, the bank enjoys a lowest gross NPA of just 1.25%
What analysts prescribe for the stock?
Most of the brokerages have a buy call on the stock and JM financial in one of its recent report has been cited as saying, "We believe Bandhan remains a strong compounding story with a play on vast rural opportunity, with best-in-class return metrics and strong operating efficiencies. Bandhan will continue to trade at premium valuations as investors acknowledge the structural growth opportunity and sustainability of return metrics".