What is IPO-candidate RBL Bank's secret sauce? CEO answers

On its closing day, the public issue of RBL Bank received bids for 2.6 billion shares as against 3.79 crore on offer, generating a subscription of nearly 70 times. Speaking to CNBC-TV18, MD & CEO Vishwavir Ahuja says the bank has been able to draw the attention of investors due to the right blend of traditional and technologically advanced banking services that it offers. 

Besides, investors also acknowledge banking as being critical to the economy and having secular growth prospects, he adds.

While RBL has presence in traditional services like corporate, commercial, SME and retail banking, Ahuja says the differentiating factor is presence in other spaces like financial inclusion development and payment banking. Because of cutting-edge technology, the bank is also able to partner with financial technology (fintech) companies that give it a rapid trajectory of growth, he adds.

He says while RBL will take time to match up to the likes of HDFC Bank and Yes Bank in terms of current account savings accounts, it is notable RBL’s CASA book has seen compounded average growth of nearly 45 percent over the last 5 years keeping pace with overall growth.Below is the verbatim transcript of Vishwavir Ahuja's interview to Latha Venkatesh on CNBC-TV18.Q: It is a good evening 69 times oversubscribed, do you regret not asking for more, you only sold 5.3 crore shares, you could have sold 50 crore shares?A: No, first of all I have to say that extremely, extremely thankful and grateful to all the investors particularly, the almost 10 lakh plus application that we have got largely from the retail space and that a good show of support and we are very, very thankful and grateful to all of them and very gratified also, that they have shown that kind of support to us.To your specific question no, I am happy with what we have, because in the very genesis and ethos of what we are trying to create as an institution, this is a long term journey and we wanted to approach the market at a time when we felt that we can deliver on the expectations over a long period of time.In many ways, this is a first milestone, many more to come I hope and therefore surely this kind of support if it is there and we are doing well, then in future capital raising efforts, hopefully we will have a similar kind of support.Q: But what's really so glitzy about banking business? You ask for Rs 1,200 crore and you get Rs 50,000 crore. Banking is a well understood business and there are some 30 listed banks to choose from.A: Well, you rightly said that this is a question that investor should answer. I can only say that, I think good banks in India, whenever they have come up and it’s largely a reflection of good governance, good management. Because whenever they have come up in this country, they have always received effusive response from the investor community. It is a space which has always delivered good returns to the investors and we have some fine examples ahead of us.I think to some extent that is the case, that we are happened to be in a space where if we continue to do it right and we continue to deliver a high quality growth business then there are people out there who want to back.Second is that a bank is very critical industry in the larger economic spectrum, it is the barometer of a larger economy and it is also a space where you can have a long term secular growth opportunity and as long as again you keep it right, then you can deliver results over a very long period of time and to that extent it is a much more reliable, dependable space to be in from an investment point of view. Ultimately, it all boils down therefore to how well you do it.Q: Your industrious predecessors HDFC Bank and then Yes Bank and Kotak Bank had actually much less competition when they came, even now HDFC has notched up 50 percent of current and savings account (CASA), yours is 18 percent, can you really replicate an HDFC Bank or a Yes Bank?A: Again, we are not comparing apples to apples, these are stalwarts in the space, we are only humble followers who are trying to again build a high quality institution and one should see that in that spirit, that we are very young in the game.If you start putting in front of me the high quality benchmarks that they have achieved over these several decades, then we still have a long distance to go but having said that I want to give one or two clarifications to you, that our CASA as you mentioned is 18.5-19 percent, but our CASA growth over the last 5 years has been upwards of 45 percent compound annual growth rate (CAGR).It is not that even at this level of CASA for a bank which has grown 20 times in size in the last 5-6 years, I think my CASA has kept in pace with the growth of the institution. It is a matter of size, scale, visibility, branding and ultimately to some extent CASA is directly proportional to scale and that is a similar pattern that you would have seen of these other well known and respected names.Q: I was coming to your growth numbers, not just deposits and loans, your earnings are growing at 58 percent compounded annually. Is this replicable? A: There we have some advantage of having come off a very small base, so the numbers look very impressive. However indeed in our business strategy and in our business model to the extent that we have matured it, we have certain business segments which are growing at a very rapid clip and these are also business segments where we have some interesting points of differentiation. In simple two sentences, we have the traditional businesses which most banks have, which also we are doing quite well at which is the corporate business, the commercial banking business, the SME business etc and the more urban styled traditional retail business. But more importantly, in two specific spaces -- the financial inclusion development banking space where we kind of bank the lower end of the pyramid and in payment banking where we extend technology led payment services to again a large mass of people and also because of our cutting edge technology -- we are an important partner to many fin tech and other distribution companies. In these spaces we have created I would say interesting and positive differentiation. So, that gives us a very rapid trajectory of growth and these are also areas which are high growth in terms of their future and potential opportunity. So, I think we have hit some right spots and to some extent we may be getting marks for that. Q: Can you just elaborate a little more on this fin tech payment business, is this fee business? What exactly is this relationship?A: What we have done is that through multiple partnerships, these could be NBFCs, these could be business correspondent partners, these could be fin tech companies, these could be distribution companies, depends on whoever they are, we use their outreach and we use their last mile access and we provide them the technology backend, we provide them the gateway, we provide them the platform to connect with us. It could be for loans, it could be for remittances, it could be for selling insurance service, it could be for many other services. The whole idea is that we have created an extended outreach of all most 30000-35000 distribution points or customer that rough these various partnerships which has therefore give us the capability of doing multiple transactions through that channel.The other things is we had put our technology API, many of them in public domain, many of them are well suited for the fin tech companies, so they can plug and play with us in terms of their own business quite seamlessly.