Buy RBL Bank; target of Rs 415 : ICICI Securities

ICICI Securities's research report on RBL Bank

We are enthused with RBL Bank’s (RBL) proposed transaction with Emirates NBD (ENBD) as it brings strong parentage to RBL, opens huge secular growth runway and solves frequent capital needs (pro forma CET 1 >35%). We highlight potential substantial dilution for existing shareholders. However, book value should remain broadly intact (FY27E ABV of ~INR 295 per share vs. proposed infusion at INR 280). We are mindful of sub-optimal pro forma RoE (due to low leverage) but believe that strong growth, superior balance sheet and an uptick in RoA could make risk-reward favourable. Our estimates do not factor in capital infusion yet.

Outlook

We upgrade RBL to BUY (vs. Hold); TP revised to INR 415 (vs. INR 250 earlier) based on ~1.4x FY27E ABV (~0.85x earlier). Key risks: Hiccups, if any, in deal consummation.