The much-awaited RBL Bank initial public offering will open for subscription on August 19. The first private lender IPO in a decade aims to raise over Rs 1,200 crore through IPO which closes on August 23. Price band is fixed at Rs 224-225 for share sale.The plan includes raising up to Rs 832.50 crore through the issue of fresh shares and up to Rs 380.46 crore in an offer for sale by existing shareholders. The share sale, accounting for 10-11 per cent stake, will give the bank a valuation of over Rs 12,000 crore.So, should you bet your money?
Most analysts are upbeat on the issue and recommend subscribing it. Analysts say RBL Bank issue is fairly priced .With a bullish stance, Prabhudas Lilladher says that the bank has stayed away from stressed sector lending like steel/power/infra which has helped it to maintain its asset quality at better levels compared to peers despite 60 percent loans in corporate & MSME.
It is positive that RBL continues to focus on retail & working capital needs of corporate which will hold up asset quality and improve margins. Post issue, at upper band of Rs225, RBL trades at 2.1x FY16 ABV of Rs 108.
Emkay also suggests to subscribe RBL Bank IPO stating that the private lender is well poised to make profitable market share gains in the medium term. It believes profitability (ROAs) could improve further if the bank is able to leverage the investments made in distribution and systems over past few years and sweat its resources efficiently.
"At the upper end of the price band the stock would trade at 2.4xFY16 reported BV and 2.1x on a post money basis for average pre-money ROEs of 10 percent for past two years," it says in a note.Cholamandalam Securities also suggests to go for the issue. It says that its cost-to-income (CSI) ratio may improve though it has remained very high at 58 percent in FY16, due to heavy investment in branch expansion and manpower."When compared with the peers on parameters like asset quality, loan book growth trajectory, profitability margins and valuations we find the bank in a sweet spot," it says.Hem Securities recommends subscribe on the issue with its superior asset quality & strong financial growth looks poised to have strong potential for future growth.
Ajcon recommends investors to subscribe it as its valuation appears cheap compared to its immediate peers in mid-sized private banking space. At the upper end of the price band of Rs. 225, the IPO is valued at 2.1x at post issue P/BV.Impressed by the bank’s strong fundamentals with healthy asset quality, improving Cost/Income ratio, strong management with thoughtfulbusiness strategies, softening interest rate cycle coupled with Government’s focus on economic growth, Aum Capital recommends subscribing the issue.Elite Wealth also suggests subscribing the issue only for listing gains. It says that earnings per share for FY16 is at Rs 9.43, price to equity (PE) works out to be at 23.86 times on FY16 earnings and 20.02 times on expected FY17 earnings. However, Arihant Capital points out that the bank has low share of CASA to deposits on its balance sheet. Its CASA stood at 18.6 percent as on FY16. RBL Bank is one of India’s fastest growing private sector banks in the last six years. Its loan book grew at CAGR of over 60 percent in last 5 years with better diversification and increasing granularity. It has been able to grow its CASA at robust pace of 45 CAGR over FY11‐FY16, while has improved market share from 0.1 percent to 0.5 percent. It has posted a superior CAGR growth of 51 percent from FY2012 to FY2016 in its advances book. Net interest margin has grown to 2.96 percent in FY16 from 2.68 percent in FY14 . RBL has maintained a capital adequacy ratio of 12.94 percent and 13.13 percent in FY16 and FY15 respectively.
As of March 31, 2016, it has 197 interconnected branches and 362 interconnected ATMs spread across 16 Indian states and union territories serving approximately 1.90 million customers.It acquired certain Indian businesses of Royal Bank of Scotland, including RBS’s business banking, credit card and mortgage portfolio businesses in FY14.Follow @NasrinzStory
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