Bandhan Bank has successfully concluded the sale of substantial unsecured non-performing asset (NPA) and written-off loan portfolios to Asset Reconstruction Companies (ARCs), marking a significant milestone in the bank's asset quality management strategy. The transactions, approved by the board of directors, involved two separate portfolio sales totaling ₹6,872.36 crore in outstanding principal.

ARCIL Transaction Details

The first major transaction involved the sale of an unsecured NPA portfolio to Asset Reconstruction Companies (India) Ltd (ARCIL) through the Swiss Challenge Method. ARCIL emerged as the winning bidder for this severely distressed portfolio.

Phoenix ARC Transaction

In a separate transaction, Bandhan Bank sold an unsecured written-off loan portfolio to Phoenix ARC Private Ltd through an auction process. Phoenix emerged as the highest bidder for this portfolio comprising loans from the Emerging Entrepreneurs Business (EEB) and Aspiring Business Group (ABG) segments.

Transaction Structure and Process

Both transactions were executed on a security receipts (SR) basis, with the bank retaining significant stakes in the portfolios. The board had previously approved the sale of identified NPAs and written-off portfolios belonging to the Emerging Entrepreneurs Business (EEB), including group loans and small business and agri loans, and the Aspiring Business Group (ABG) segments.

The Swiss Challenge Method used for the ARCIL transaction allowed for competitive bidding, while Phoenix ARC secured the second portfolio through a standard auction process. These structured approaches ensured competitive pricing for the distressed assets.

Market Performance

Shares of Bandhan Bank ended at ₹145.85, up by ₹0.97, or 0.67%, reflecting positive market sentiment following the announcement of these strategic asset sales. The transactions are expected to help improve the bank's asset quality metrics and strengthen its balance sheet position.

Bandhan Bank has completed a major portfolio cleanup by offloading bad loans worth ₹6,872.36 crore to asset reconstruction companies for a total consideration of ₹901.72 crore, according to an exchange filing on Monday. The strategic move involves disposing of non-performing assets (NPAs) and written-off loan portfolios from the bank's Emerging Entrepreneurs Business segment.

NPA Portfolio Sale to ARCIL

The bank sold its unsecured NPA portfolio with principal outstanding of ₹3,165.25 crore to Asset Reconstruction Company (India) Ltd. (ARCIL) for ₹569.75 crore. ARCIL emerged as the winning bidder under the Swiss Challenge Method, with the transaction structured on Security Receipts basis.

The security receipts subscription was divided between ARCIL taking 53.25% amounting to ₹303.39 crore, while Bandhan Bank retained 46.75% worth ₹266.36 crore.

Written-Off Loan Portfolio Transaction

In a separate transaction, Bandhan Bank offloaded its unsecured written-off loan portfolio valued at ₹3,707.11 crore to Phoenix ARC Pvt. for ₹331.97 crore. Phoenix ARC secured the deal as the highest bidder through an auction process.

Phoenix ARC subscribed to 37.84% of security receipts amounting to ₹125.60 crore, while Bandhan Bank retained 62.16% of SRs worth ₹206.37 crore.

Portfolio Composition and Business Impact

The disposed portfolios belonged to Bandhan Bank's Emerging Entrepreneurs Business segment and included:

• Group loans
• Small business loans
• Agricultural loans
• Aspiring business groups financing

Both portfolios consisted entirely of unsecured lending products, representing the bank's strategic focus on cleaning up its balance sheet by transferring problematic assets to specialized reconstruction companies.

Market Performance

Shares of Bandhan Bank closed 0.67% higher at ₹146.05 on the National Stock Exchange on Monday, outperforming the benchmark Nifty which declined 0.38%. However, the stock has fallen 8.18% on a year-to-date basis, reflecting broader market challenges.

Analyst sentiment remains mixed with 11 out of 28 analysts maintaining 'buy' ratings, 11 recommending 'hold', and six suggesting 'sell' according to Bloomberg data. The average 12-month price target implies a potential upside of 20.70% from current levels.