Shares of RBL and Bandhan Bank hit new all-time lows, falling below their respective initial public offer (IPO) prices, on the BSE on Monday after a sharp sell-off in the equity markets.
Individually, RBL Bank slipped 18 per cent to Rs 212 in the intra-day trade, to hit its lowest level since its listing on August 31, 2016. The stock of the private sector lender fell below its issue price of Rs 225 per share.
Analyst at JP Morgan, rate RBL Bank ’underweight’ as the brokerage firm believes that the bank’s valuations would stay under pressure due to the stress emerging in the mid-corporate space, coupled with the bank’s relatively high exposure to risky assets evident from its high outstanding share of BB and BBB book.
“We think the bank’s deposit franchise is still at a nascent stage and funding risk is likely to evolve as underwriting standards on the midcorporate space come into question. Furthermore, the bank’s relatively high reliance on unsecured lending (credit cards and MFI), low level of seasoning, and non-exclusive partnership with Bajaj Finance (BAF) increase the overall risk profile,” the brokerage firm said in report dated January 23, 2020.
Bandhan Bank, on the other hand, too fell below its issue price of Rs 375 today, down 9 per cent at Rs 368 on the BSE. The stock was trading at its lowest level since its listing on March 27, 2018.
Concerns regarding overleveraging and the protests in Upper Assam have resulted in a sharp reduction in Bandhan’s stock price, leading to erosion of 28 per cent thus far in calendar year 2020, as against a 14 per cent decline in the S&P BSE Sensex.
Analysts at JM Financial Institutional Securities believe Bandhan Bank’s long-standing track record of maintaining asset quality in the region and inherent franchise strengths (customer loyalty, high-touch model) should help it navigate the current challenging environment.