Daily Brief Financials: Bandhan Bank Ltd, Japan Rental Housing Investment, IP Group PLC, Shriram Transport Finance and more

• Bandhan Bank Ltd (BANDHAN IN) has been an underperformer among Indian banks since the start of the COVID-19 pandemic due to asset quality issues in its core Group Microfinance portfolio.
• Bandhan Bank’s leading position in the microfinance sector, strong operating margins, strategic de-risking, self-sustaining capital base, and cheap relative valuations make it a value bet with strong positive re-rating potential.
• We value Bandhan Bank at 2.1x FY25e P/B in the base case, implying a 44% upside. On the other hand, we also discuss the risks to the thesis in detail.

• Midsize residential JREIT Daiwa Securities Living (8986 JP) (“DSLIC“) launched a follow-on equity offering to partially fund their recently-announced acquisitions.
• The primary offer quantity will be 139,047 units and there will also be an over-allotment quantity of 6,953 units.
• In this insight, we take a closer look at the details of this offering and the historical performance of DSLIC’s previous follow-on equity offerings.

IP Group has built a commendable portfolio of businesses developing breakthrough technologies, with an aggregate value of more than £200m at end-June 2023 (c 16% of IP Group’s total portfolio value), mostly across four key focus areas: applied AI, next-generation networks, human-machine interface and future compute. Importantly, around 90% of the deeptech portfolio (by fair value) has already started to generate revenue. Both of its two most valuable holdings, Featurespace (adaptive behavioural analytics for fraud and financial crime detection) and Garrison Technology (which provides a remote web browser and related hardware) have revenues in the tens of millions sterling and growing quickly.

• Shriram Finance (formerly Shriram Transport Finance) now includes two major subsidiaries in its numbers, in the listed entity, driving up AUM, ROA and net profit.
• There is strong latent demand in India for pre-owned commercial vehicles and passenger vehicles, where SHTF focuses, with a long track record of good profit, ROA, NIM.
• Underwriting seems strong given stage 3 and stage 2 loan data, and with funding cost improvements, from distribution of liabilities, good scope for profit growth, ROA, NIM.