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Review By Dilip Davda on August 11, 2016

RBL Bank Ltd.-(formerly known as The Ratnakar Bank Ltd.)- (RBL) 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 industry domain knowledge, experience and technology with the goal of satisfying the client’s complete banking needs. RBL offers a comprehensive range of banking products and services customized to cater to the needs of large corporations, small and medium enterprises (“SMEs”), agricultural customers, retail customers and development banking & financial inclusion (low income) customers.

The bank has been expanding presence across India through a growing network of branches and ATMs and upgrading traditional delivery channels with modern technology-enabled channels like phone banking, internet banking and mobile banking. As of March 31, 2016, RBL had 197 interconnected branches and 362 interconnected ATMs spread across 16 Indian states and union territories serving approximately 1.90 million customers. RBL has a long history in India, with operations since 1943 when Bank was incorporated as a small, regional bank in Maharashtra with two branches in Kolhapur and Sangli. Though the Bank has a 73-year operating history, it has transformed itself in the past six years from a traditional bank into a ‘New Age’ bank while harnessing its heritage, relationships with customers and domain strengths. Bank’s transformation commenced in 2010 during the difficult economic period following the global financial crisis as well as the economic slowdown that followed in India.

To raise Tier-I equity capital base, the bank is coming out with a maiden IPO of fresh equity issue worth Rs. 832.50 crore (approx 3.7 crore equity shares) and offer for sale of 16909628 equity shares by existing stakeholders. The equity share having face value of Rs. 10 per share is being issued via book building route with a price band of Rs. 224-225. Thus the aggregate offer size is of Rs. 1213 crore. Mere Re. 1 difference in price band makes it a virtual fixed priced IPO. Minimum application is to be made for 65 shares and in multiples thereon, thereafter. Issue opens for subscription on 19.08.16 and will close on 23.08.16.

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. Post allotment, shares will be listed on BSE and NSE. Having issued equity shares at par till February 2007, it issued further equity in a price range of Rs. 40 to Rs. 195 per share during March 2007 to July 2016. Post IPO its current paid up equity capital of Rs. 332.81 crore will stand enhanced to Rs. 369.81 crore.

On performance front, bank’s total income has grown from Rs. 532.22 cr. in Fiscal 2012 to Rs. 3234.85 cr. in Fiscal 2016, which represents a CAGR of 57.02%, other income has increased from Rs. 67.13 cr. in Fiscal 2012 to Rs. 490.54 cr. in Fiscal 2016, which represents a CAGR of 64.42%, net profit after tax has increased from Rs. 65.10 cr. in Fiscal 2012 to Rs. 292.49 cr. in Fiscal 2016, which represents a CAGR of 45.59%, deposits grew from Rs. 4739.33 cr. at the end of Fiscal 2012 to Rs. 24348.65 cr. at the end of Fiscal 2016, which represents a CAGR of 50.55% , advances grew from Rs. 4132.27 cr. at the end of Fiscal 2012 to Rs. 21229.08 cr. at the end of Fiscal 2016, which represents a CAGR of 50.54% for the past four fiscal years respectively. As part of the growth strategy, 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 Fiscal 2014. RBL has received number of awards and recognitions in the recent past.

If we attribute latest earnings on post IPO enhanced equity then the asking price is at a P/E of 28 plus which compares well with its peers like IndusInd Bank, Kotak Mahindra Bank. The shares are offered at a lower P/BV of 2.2 compared to its peers. Bank has followed strict governance that helped it keeping NPAs around 1% and has thus expressed its superior quality of assets. Management is confident of maintaining the progress with most vigilant business practice it has followed since 2010. RBL’s net NPA ratio was 0.31%, 0.27% and 0.59% as of March 31, 2014, 2015 and 2016, respectively, while gross NPA ratio was 0.79%, 0.77% and 0.98%, respectively, as of the same dates.

On BRLM’s front, the team of 9 BRLM involved with this issue handled 38 issues in the past three years, out of which 12 issues closed below offer price on the listing day.

Conclusion: Bank has continued to outperform on Y-o-Y with modern business practices and governance in place. Banking counters are now gauged on asset quality aspects. Considering this, issue may be considered by investors for long term investment.

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