KOLKATA • BlackRock and Singapore's sovereign wealth fund GIC bought shares in Bandhan Bank as the main shareholder of India's most profitable bank sold 106 billion rupees (S$1.9 billion) of its stake to meet the regulator's ownership rules.
Temasek and SBI Mutual Fund also bought shares, the bank's founder and chief executive Chandra Shekhar Ghosh said in an interview. GIC received the Reserve Bank of India's (RBI) approval to raise its stake in the lender to 10 per cent from 4.9 per cent, he said.
Bandhan Financial Holdings sold 337.4 million shares in the Indian lender at 313.1 rupees in a block trade on Monday, a 9.3 per cent discount to the last closing price, according to deal terms seen by Bloomberg News.
Bandhan Bank's shares plunged 10.5 per cent to 308.8 rupees in Mumbai after the transaction, its biggest loss since March 30.
The central bank restricted branch expansion by Bandhan Bank, which specialises in lending to small borrowers, after the founding firm failed to lower its stake to 40 per cent last year.
Bandhan Bank then agreed to combine with mortgage financier Gruh Finance in a US$11.7 billion (S$16.1 billion) deal to pare the founder's stake as mandated, after which the central bank partially relaxed its curbs on the lender.
Mr Karthik Srinivasan, group head of financial sector ratings at ICRA, the local arm of credit assessor Moody's Investors Service, said: "RBI is very clear that shareholding in private banks should be diversified as it reduces concentration risk.
"The urgency of stake sale by Bandhan founders shows that RBI is on track on its rules regarding shareholding in private banks."
The central bank is reviewing its norms on shareholding in private banks, which stipulate founders cut their stake to 15 per cent eventually, as it aims to improve corporate governance. Mr Ghosh, citing RBI rules, said that after the latest sale, the founders will need to lower their stake to 20 per cent by August 2023.
Bandhan Financial Holdings' shareholders, which include GIC, International Finance Corp and Mr Ghosh, plan to use the proceeds to start new ventures such as insurance and asset management, subject to RBI's approval, Mr Ghosh said.
Some of Bandhan Bank's profitability metrics, including return on assets and return on equity, are the highest among Indian banks.
Credit Suisse Securities (India), JPMorgan India, Goldman Sachs (India) Securities and JM Financial Institutional Securities are joint bookrunners for the deal.