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

The board of directors of Bandhan Bank on April 05 took on record the letter submitted by its Managing Director & Chief Executive Officer Chandra Shekhar Ghosh informing that he would retire from the services of the Bank as the MD & CEO upon completion of his current tenure on July 09, 2024.

Bandhan Bank shares have fallen more than 18% in 2024 so far, underperforming the Bank Nifty index and the benchmark Nifty 50.Premium
Bandhan Bank shares have fallen more than 18% in 2024 so far, underperforming the Bank Nifty index and the benchmark Nifty 50.

Bandhan Bank share price plunged 9% in early trade on Monday after its MD & CEO Chandra Shekhar Ghosh resigned from his position. Bandhan Bank shares declined as much as 9.04% to 179.55 apiece on the BSE.

The board of directors of Bandhan Bank on April 05 took on record the letter submitted by its Managing Director & Chief Executive Officer Chandra Shekhar Ghosh informing that he would retire from the services of the Bank as the MD & CEO upon completion of his current tenure on July 09, 2024.

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

Read here: Bandhan Bank CEO Chandra Shekhar Ghosh to step down when tenure ends in July

Foreign brokerage Jefferies has downgraded its rating on Bandhan Bank to ‘Underperform’ from ‘Buy’ after its founder & CEO Ghosh resigned with effect from July 9 this year.

Jefferies also slashed its target price on Bandhan Bank shares to 170 from 290 earlier, implying a potential downside of nearly 14% from Friday’s closing price.

The brokerage believes the resignation of the founder-CEO is a negative surprise, saying that a smooth transition and succession is key for Bandhan Bank as most of the senior staff at the bank is new.

Bandhan Bank board had even approved a three-year reappointment and the application was awaiting approval from the Reserve Bank of India (RBI).

Also Read: Voltas share price gained 10%, scaled 52-week highs on achieving record 2 million units AC sales during FY24

Jefferies said that any potential uncertainty may lead to slower growth and higher credit costs for the private lender. 

“Given the uncertainty, we are lowering our growth outlook and credit cost estimates for FY25-26, driving our EPS down by about 10-14%. We also see valuations staying under overhang from such uncertainty," Jefferies said.

Meanwhile, Bandhan Bank shares are in the F&O ban list for Monday’s trading session. This means that no fresh positions are allowed for any of the F&O contracts in the Bandhan Bank stock.

Nomura also downgraded its rating on Bandhan Bank to ‘Reduce’ from ‘Buy’ and slashed the target price to 175 from 275 earlier on the CEO’s surprise retirement.

According to Nomura, the impact of the sudden departure of the CEO on the bank’s business (especially liabilities, asset quality and growth) will be a key monitorable

With leadership now being in flux, we see more uncertainties going ahead for the franchise, and so downgrade our rating; valuing the bank at 1x FY26F BVPS (1.5x previously), with the lower target multiple factoring in a higher cost of equity, Nomura said.

Also Read: Signature Global shares gain 4.5% after Q4 sales bookings jump 240%

It also needs to be seen if RBI appoints any representative to Bandhan Bank’s board, as was the case in a recent similar situation in the case of RBL Bank in December 2021.

Bandhan has seen a spate of senior management exits over the past two years, which has added to the bank’s weakening perception among investors, the brokerage firm noted.

Emkay Global Financial Services believes Ghosh’s sudden resignation at this crucial juncture could usher in business or management uncertainty and potentially delay, if not derail, the bank’s recovery story, unless he is replaced by a credible candidate. 

“Given the incumbent ED being relatively inexperienced, we believe Bank may look for an external candidate to fill in its permanent MD & CEO position; this though could be a long drawn-out process," Emkay Global said.

It believes this development could lead to further correction in the already beaten down stock and thus lowered its rating to ‘Reduce’ and cut the target price to 175 per share from 270 earlier.

“Post the near term correction, we believe the stock would enter a consolidation phase and any re-rating would be conditioned to smoother/more credible management transition and sustained asset quality recovery, which will not be easy," Emkay Global said.

Bandhan Bank shares have fallen more than 18% in 2024 so far, underperforming the Bank Nifty index and the benchmark Nifty 50.

At 9:20 am, Bandhan Bank shares were trading 6.79% lower at 184.00 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 08 Apr 2024, 09:23 AM IST
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