The initial public offering (IPO) of private sector lender RBL Bank opened on Friday (Aug. 19). The Kolhapur-based bank is planning to raise about Rs. 1,200 crore through the public issue that closes next Tuesday (Aug. 23).
RBL Bank had raised Rs. 488 crore in pre-IPO preferential placement of shares last December at Rs. 195 per share.
The bank was incorporated in 1943 as Ratnakar Bank.
The exercise was in accordance with its IPO document filed with the Securities and Exchange Board of India (Sebi) in June 2015 and the shares were placed with international investors, including Asian Development Bank (ADB) and CDC Group Plc.
Details of RBL Bank IPO:
- Price band: Rs. 224-225 per share
- Issue opens on Aug. 19 and closes on Aug. 23
- Bid lot: 65 equity shares or multiples thereof
- Overall issue size: 5,39,09,628â€“5,40,74,806 shares
- Face value: Rs. 10
- Retail portion: 35 percent of the public issue (1,88,68,370 - 1,89,26,183 shares)
- Listing on BSE and NSE
- The objective of the issue is to meet future Tier-I capital base requirement to ensure compliance with Basel-III norms and other RBI guidelines
The IPO comprises both offer for sale (OFS) by existing investors and fresh issue of shares; the public issue has received positive analyses from many brokers and analysts.
In its note, the brokerage that the bank has a strong multi-channel distribution system with presence in major cities such as Mumbai, Chennai, Bengaluru, Delhi, Kolkata and its headquarter, Kolhapur. Besides, its "robust" corporate governance system under the leadership of MD& CEO Vishwavir Ahuja is seen as a big positive for the bank.
The bank acquired the credit card and mortgage portfolio businesses of Royal Bank of Scotland (RBS) in FY14 to boost its presence in these segments and drive overall growth.
"We recommend SUBSCRIBE to the IPO on the back of strong management team, healthy growth in business and earnings, and reasonable valuations. We expect listing gains," the brokerage said.
Geojit BNP Paribas Research
The brokerage said RBL Bank's dependence on certain geographies could be a risk factor, besides moderation in growth. "Concentration risk as the bank has about 48 percent of total branches in Maharashtra," Geojit BNP Paribas Research in its note.
On the positive side, it listed increase in other income, asset quality and top management of the bank.
"RBL Bank has focused on increasing the share of non-interest income across its client segments. As a result, the share of its non-interest income increased from 26.4 percent of its net total income in FY12 to 37.4 percent in FY16," the brokerage said. "
"The bank expects the share of other income to increase further through higher share of fee revenues form innovative services such as mobile remittances, prepaid cards, forex cards and other business banking services," it added.
"As a result of its focus on effective risk management, it has been able to maintain its asset quality amidst challenging macro environment. RBL's gross non-performing assets (NPAs) stood at 0.8 percent and 1 percent as of FY15 and FY16, respectively whereas its net NPAs stood at 0.3 percent and 0.6 percent as of FY15 and FY16, respectively. Its standard restructured loans as a percentage of net advances stood at 0.6 percent and 0.1 percent as of FY15 and FY16, respectively," Geojit BNP Paribas said in its note.
"RBL Bank Ltd is one of India's fastest growing private sector banks in the last six years. It has cultivated a customer-centric culture where it uses its industry domain knowledge, experience and technology with the goal of satisfying the client's complete banking needs," the brokerage said in its note.
It also said that the bank's foray into semi-urban and rural areas to expand its reach in these markets would bring benefits to its operations and profitability.
"It has entered into exclusive partnership agreements with select business correspondents in relation to these businesses to originate client business â€“ spanning loans, savings accounts, insurance, etc. In addition, these partners help bank in establishing significant number of transaction points across many states which enable it in providing payments and other banking services across underbanked and unbanked India," HDFC Securities said.
"RBL has also recently acquired a minority stake in Swadhaar FinServe Private Limited, a business correspondent engaged in offering of products and services to inadequately served sections of businesses, households and enterprises, for a consideration of approximately Rs 205 million.
"In Fiscal 2017, Swadhaar FinServe Private Limited will be its associate as its stake in Swadhaar FinServe Private Limited is greater than 20%. Further, the Bank is considering a purchase of a minority stake in Utkarsh Micro Finance Private Limited, an applicant for a small finance bank license, subject to regulatory approvals," it added.
RBL Bank had 197 interconnected branches and 362 interconnected ATMs spread across 16 Indian states and union territories as of March 31, 2016.
The bank earned a net profit of Rs. 292.48 crore on revenues of Rs. 3,234.85 crore for the financial year 2015-16, up from Rs. 208.45 crore and Rs. 2,356.5 crore in the preceding financial year.
The diluted EPS was Rs. 9.43 for 2015-16 as against Rs. 7 in 2014-15 (Diluted earnings per share reflect the potential dilution that could occur if contracts to issue equity shares were exercised or converted during the period).
Deposits and advances stood at Rs. 24,348 crore and Rs. 21,229 crore, respectively, as of March 31, 2016.
Net non-performing assets (NPAs) as percentage of total advances rose to 0.59 percent from 0.27 percent at the end of financial year 2014-15.