Bandhan Bank share price falls over 9% after MD & CEO resigns; Jefferies downgrades stock, cuts target

The board of administrators of Bandhan Financial institution on April 05 took on file the letter submitted by its Managing Director & Chief Govt Officer Chandra Shekhar Ghosh informing that he would retire from the providers of the Financial institution because the MD & CEO upon completion of his present tenure on July 09, 2024.

Ghosh has been serving as MD & CEO of Bandhan Financial institution since July 10, 2015.

Learn right here: Bandhan Financial institution CEO Chandra Shekhar Ghosh to step down when tenure ends in July

International brokerage Jefferies has downgraded its ranking on Bandhan Financial institution to ‘Underperform’ from ‘Purchase’ after its founder & CEO Ghosh resigned with impact from July 9 this yr.

Jefferies additionally slashed its goal worth on Bandhan Financial institution shares to ₹170 from ₹290 earlier, implying a possible draw back of almost 14% from Friday’s closing worth.

The brokerage believes the resignation of the founder-CEO is a detrimental shock, saying {that a} clean transition and succession is essential for Bandhan Financial institution as a lot of the senior workers on the financial institution is new.

Bandhan Financial institution board had even authorised a three-year reappointment and the appliance was awaiting approval from the Reserve Financial institution of India (RBI).

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Jefferies mentioned that any potential uncertainty could result in slower progress and better credit score prices for the non-public lender. 

“Given the uncertainty, we’re reducing our progress outlook and credit score price estimates for FY25-26, driving our EPS down by about 10-14%. We additionally see valuations staying underneath overhang from such uncertainty,” Jefferies mentioned.

In the meantime, Bandhan Financial institution shares are within the F&O ban listing for Monday’s buying and selling session. Which means that no contemporary positions are allowed for any of the F&O contracts within the Bandhan Financial institution inventory.

Nomura additionally downgraded its ranking on Bandhan Financial institution to ‘Cut back’ from ‘Purchase’ and slashed the goal worth to ₹175 from ₹275 earlier on the CEO’s shock retirement.

In accordance with Nomura, the influence of the sudden departure of the CEO on the financial institution’s enterprise (particularly liabilities, asset high quality and progress) will likely be a key monitorable

With management now being in flux, we see extra uncertainties going forward for the franchise, and so downgrade our ranking; valuing the financial institution at 1x FY26F BVPS (1.5x beforehand), with the decrease goal a number of factoring in the next price of fairness, Nomura mentioned.

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It additionally must be seen if RBI appoints any consultant to Bandhan Financial institution’s board, as was the case in a current comparable scenario within the case of RBL Financial institution in December 2021.

Bandhan has seen a spate of senior administration exits over the previous two years, which has added to the financial institution’s weakening notion amongst traders, the brokerage agency famous.

Emkay International Monetary Providers believes Ghosh’s sudden resignation at this significant juncture might usher in enterprise or administration uncertainty and doubtlessly delay, if not derail, the financial institution’s restoration story, except he’s changed by a reputable candidate. 

“Given the incumbent ED being comparatively inexperienced, we imagine Financial institution could search for an exterior candidate to fill in its everlasting MD & CEO place; this although could possibly be a protracted drawn-out course of,” Emkay International mentioned.

It believes this growth might result in additional correction within the already crushed down inventory and thus lowered its ranking to ‘Cut back’ and reduce the goal worth to ₹175 per share from ₹270 earlier.

“Publish the close to time period correction, we imagine the inventory would enter a consolidation section and any re-rating could be conditioned to smoother/extra credible administration transition and sustained asset high quality restoration, which is not going to be simple,” Emkay International mentioned.

Bandhan Financial institution shares have fallen greater than 18% in 2024 up to now, underperforming the Financial institution Nifty index and the benchmark Nifty 50.

At 9:20 am, Bandhan Financial institution shares had been buying and selling 6.79% decrease at ₹184.00 apiece on the BSE.

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Disclaimer: The views and suggestions made above are these of particular person analysts or broking corporations, and never of Mint. We advise traders to examine with licensed consultants earlier than making any funding choices.

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Revealed: 08 Apr 2024, 09:23 AM IST