RBL BANK IPO Review

Incorporated in 1943 as a regional bank in Maharashtra, RBL Bank Ltd. (formerly Ratnakar Bank)  is a Mumbai India based private sector bank offering range of banking products and services to large corporations, SMEs, agricultural customers, retail customers and development banking & financial inclusion (low income) customers.

As of March 31, 2015, RBL had 183 branches and 348 ATMs spread across 13 Indian states serving over 1.3 million customers.

RBL acquired certain Indian businesses of the Royal Bank of Scotland (RBS), including the RBS’s business banking, credit card and mortgage portfolio businesses, in 2014.

  • Company Promoters:
  • RBL is a professionally managed company and does not have an identifiable promoter in terms of the SEBI Regulations and the Companies Act, 2013. Consequently, it has no ‘promoter group’ nor any ‘group companies’ in terms of the SEBI Regulations.
  • Existing Investors – In recent years, RBL Bank has roped in major financial institutions and private equity leaders as investors through four rounds of funding. CDC Group, Asian Development Bank (ADB), World Bank arm International Finance Corporation (IFC), Norwest Venture Partners (NVP), Faering Capital India are among the biggest investors in the bank. CEO Vishwavir Ahuja owns 2.71% equity stake in the bank.

Current Market premium is Rs. 40/- to Rs. 44 /-

Name of Employee # Of Options Granted # Of Options Exercised # Of Options Outstanding Value (In Crores)
Vishwavir Ahuja 5,252,900 3,021,670 2,231,230 118.19
Rajeev Ahuja 3,502,900 1,927,670 1,575,230 78.82
Shanta Vallury 1,271,900 753,130 518,770 28.62
Naresh Karia 1,028,400 553,730 474,670 23.14
R Gurumurthy 1,852,250 1,071,065 781,185 41.68
Joginder Singh Rana 970,650 790,895 179,755 21.84
Andrew Gracias 1,851,650 820,495 1,031,155 41.66
Manoj Rawat 802,150 297,425 504,725 18.05
Satish Dhawan 646,650 389,195 257,455 14.55
Sandeep Thapliyal 796,100 586,700 209,400 17.91
Surinder Chawla 886,100 484,200 401,900 19.94
Sanjay Sharma 426,100 189,200 236,900 9.59
Harjeet Toor 951,100 352,700 598,400 21.40
Rana Vikram Anand 750,000 381,300 368,700 16.88
Sunny Uberai 460,500 186,500 274,000 10.36
Rajeev Dewal 225,500 20,000 205,500 5.07
Amareesh Gulati 700,500 150,000 550,500 15.76
Neeta Mukerji 650,000 0 650,000 14.63
Brijesh Mehra 1,000,000 0 1,000,000 22.50
Vinay Tripathi 54,000 20,260 33,740 1.22

Issue Details

Issuer: RBL Bank limited

Issue Type: 100% Book Built Issue IPO

Issue Open: Friday, Aug 19, 2016

Issue Close: Tuesday, Aug 23, 2016

Issue Size (Rs): Rs. 1,211.28 – 1,212.97 Cr. Face Value: Rs.10 per Equity Share

Price Band: Rs.224 – Rs.225 per Equity Share Bid Lot: 65 Equity share and multiple of thereof

Maximum Bid amount for Retail: Rs. 2 Lakhs Listing: BSE, NSE

Issue Size and Investor Category Allocation

Total Issue Size: 5,39,09,628 – 5,40,74,806 Equity Shares.

QIB: 50% of the Issue Size (2,69,54,813~ – 2,70,37,402^ Equity Shares)

Non Institutional Bidders:

15% of the issue size (80,86,445 – 81,11,221 Equity shares)

Retail Individual Bidders:

35% of the Offer (1,88,68,370 – 18,926,183 Equity shares)

BRLMs to the issue are Kotak Mahindra Capital Co. Ltd, Axis Capital Ltd., Citigroup Global Markets India Pvt. Ltd., Morgan Stanley India Co. Pvt. Ltd., HDFC Bank Ltd., ICICI Securities Ltd., IDFC Securities Ltd. IIFL Holdings Ltd. and SBI Capital Markets Ltd. Link Intime India Pvt. Ltd. is the registrar to the issue.

Objects of the Issue:

1.The Offer for Sale

RBL Bank will not receive any proceeds from the Offer for Sale.

2.The Fresh Issue

The proceeds from the fresh issue will be utilised towards the following objects:

Augment capital base to meet Bank’s future capital requirements ;

Enhance their visibility and brand name among existing and potential customers.;

General corporate purposes.

rbl bank

Key Highlights:

First bank IPO in a long time – It is first bank IPO in India after state-run Punjab & Sind Bank listed in 2010. Among private sector banks, the last IPO was of Yes Bank in July 2005.

NPAs – Despite the rapid growth in recent years, the bank has one of the lowest NPA levels in the industry. For FY2016, RBL Bank’s gross and net NPAs stood at 0.98% and 0.59%, respectively.

Capital Adequacy Ratio (CAR) –  As of 31 March 2016, RBL Bank’s Capital Adequacy Ratio (CAR) stood at 12.94% (comprising of 11.1% Tier 1 capital), comfortably meeting the Basel III capital requirements.

Key Operational and Financial Information:

Year ended March 31,

2014

2015

2016

No. of Branches /extension counters

172

183

197

Total Advances (Net)

9,835.05

14,449.83

21,229.08

Total Assets

18,197.08

27,103.65

39,160.09

Total Deposits

11,598.60

17,099.25

24,348.65

CASA Ratio (%)*

20.43%

18.46%

18.64%

Net Interest Margin (%)

2.68%

3.01%

2.96%

Capital Adequacy Ratio (CAR) %#

14.64%

13.13%

12.94%

Cost to Income Ratio (%)~

70.35%

62.48%

58.59%

Net Profit

92.67

207.18

292.48

Gross NPA %(% of Gross Advances)

0.79%

0.77%

0.98%

Net NPA% (% of Net Advances)

0.31%

0.27%

0.59%

Return on Asset (%)^

0.66%

1.02%

0.98%

Provision coverage (%)

65.73%

68.28%

55.87%

CASA ratio is determined as the sum of demand deposits and saving deposits divided by total deposits.

CAR for Fiscal 2014, 2015 and 2016 is computed as per Basel III framework.

Cost to Income Ratio is computed as the percentage of operating expenses to net total income which is defined as the sum of interest income and other income less interest expense.

Return on Asset is arrived as a percentage of Net profit to Average Total Assets (from Average Balance Sheet).

Return on Equity & Assets

(Rs in Cr or othewise stated)

Year ended March 31,

2014

2015

2016

Net profit

92.67

207.18

292.48

Average Total Assets (“ATS”)

14,090.44

20,284.13

29,733.13

Average Shareholders’ Equity^

1,704.76

2,162.37

2,584.51

Return on Equity (%)

5.44%

9.58%

11.32%

Return on Assets (%)

0.66%

1.02%

0.98%

Average Shareholders’ equity as a % of ATS

12.10%

10.66%

8.69%

Dividend payout ratio (%)

26.53%

17.70%

16.67%

Average of month end balances of Share capital and reserves; Return on equity =(net profit to average shareholders’ equity); Return on assets =(net profit to average assets); Dividend payout ratio -(Excluding Corporate Dividend Tax)

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Positive

  • The company has received a number of awards and recognitions including In 2016 – “Best Corporate Payment Project” by The Asian Banker Achievement Awards (Technology Innovation Awards);
  • In 2016 – MasterCard Innovation Awards for the debit card program
  • In 2015 – “Best Bank Overall (Small)” and “Best Bank (Quality of Assets)” by Business Today – KPMG Best Bank Survey;
  • In 2015 & 2014 -“The Best Bank – Priority Sector Lending (Private Sector)” by Dun & Bradstreet Banking Awards;
  • In 2014 – “Global Growth Company” by the World Economic Forum;
  • In 2015,2014 & 2013 – “The Fastest Growing Small Bank” by Business World Magna Awards – PwC Best Bank Survey; and
  • In 2015, 2014, 2013 & 2012 – “India’s Best Bank (Growth) in the Mid-Sized Bank segment” by Business Today – KPMG Best Bank Survey.
  • Client focused approach to business resulting in growing brand recognition.
  • Robust multi-channel distribution system.
  • Partnership, investment and acquisitions that expand their reach in rural markets.
  • Growing net interest and net-interest income (Grown at a CAGR of 44.71% for the past four fiscal years.)

Negative

Its success depends largely upon its management team and skilled personnel and its ability to manage attrition as well as to attract and retain personnel And they are involved in certain legal and other proceedings in India and may face certain liabilities as a result of the same.
RBL has issued preferential shares to the members violating SEBI norms. It paid over Rs. 47 Lakh to SEBI as a penalty.

 

Its business is vulnerable to interest rate and Investment related risks.

Volatility in interest rate, Value of Investments and other market conditions could adversely affect its net interest margin.

Margins are low and inconsistent in the last few Years.

Their recent growth may not be indicative of their future performance and they may not be able to continue or improve their recent performance levels.

Valuation – For FY2016, RBL Bank’s diluted EPS was INR9.43. At INR225 per share, RBL Bank IPO is priced at a P/E ratio of 23.9 while the P/B (Price to book value) ratio is at 2.44.

Investment Stretagy

Low Risk – Low Return

Current Market premium is Rs. 40/- to Rs. 44 /-

DISCLAIMER

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.

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