Ajcon Global has come out with its report on RBL Bank IPO. The research firm has recommended to "Subscribe" the IPO in its research report as on August 17 , 2016.
RBL Bank Ltd (“RBL”) erstwhile Ratnakar Bank has 73 year old history. The real defining transformation started from the year 2010 with key management from reputed global banks calling the shots. The Bank differentiates itself from other mid - sized private banks for having cultivated a customer centric culture with the goal of satisfying the clients complete banking needs rather than having a bouquet of products and services which is commendable. Today, RBL is one of the fastest growing Private Sector Bank, having wide distribution network with presence through 197 interconnected branches and 362 interconnected ATMs in 16 States and Union Territories in India serving over 1.9 million customers. Initially, 78 percent of the Bank’s business was from the states like Maharashtra and Karnataka (95 of total 197 branches). Today, it has diversified into different geographies in India and both these states contribution has reduced to around 45% of total business. 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 operates in different business segments:
a) Corporate & institutional Banking (38.56% of total net advances) – This segment focuses on transactional non –fund based business.
b) Commercial Banking (21.26% of total net advances) – Focuses on the finance and business needs of SMEs.
c) Development Banking and Financial Inclusion (14.76% of total net advances) – Entering and expanding in this segment through carefully selected partners.
d) Agribusiness banking (8.27% of total net advances) – Apart from core farm banking, also entering into rural areas through branchless banking.
e) Branch and business banking (17.15% of total net advances) – This is a new business started in 2015, combining the retail banking and the branch business banking.
Investment Rationale and Recommendation
At the upper end of the price band of Rs. 225, the IPO is valued at 2.1x at Post issue P/BV which is cheap as compared to its immediate peers in mid - sized private banking space. With due consideration to factors like a) one of India’s fastest growing private sector banks in the last six years, b) robust corporate governance framework as well as experienced management team, c) transformed from traditional bank into a ‘New Age’ bank, d) broad-based shareholder and capital base, e) leading and reputed Private Equity players invested which instills confidence on the operations and risk management of the Bank, f)focus on operational quality and scalability, g) strong growth in Loan Book with minimal NPAs (Gross NPAs below 1%), h) decent ROE of 11% and RoA of 1%, we recommend investors to “SUBSCRIBE” the issue.