RBL Bank IPO; this is what brokerages are saying
RBL has been able to rebalance its portfolio from 75% corporate/SME in FY13 to 60% currently and has been able to grow retail at fast pace with CAGR of +70% increasing it to 17% of loans.
Initial Public Offering (IPO) of RBL Bank (formerly known as Ratnakar Bank) will open on Friday August 19, 2016. The bank is looking to raise Rs 1,213 crore in total which includes Rs 378.5 crore via an Offer For Sale (OFS) to its existing shareholders.
The IPO closes on August 23,2016. Price band of the IPO is fixed at lower band of Rs 224 and upper band of Rs 225 per share.
The banks claims that it is one of India's fastest growing bank over the past six years.
Pritesh Bumb, R Sreesankar and Vidhi Shah of Prabhudas Lilladher, in a report dated August 18, 2016 said, "In FY10, bank’s operations came under helm of new management team which transformed the bank with superior growth, better branding & strong technology. RBL has been able to rebalance its portfolio from 75% corporate/SME in FY13 to 60% currently and has been able to grow retail at fast pace with CAGR of +70% increasing it to 17% of loans."
They suggest that investors should subscribe to the IPO.
Ridhi Mehta of Anand Rathi said," RBL has built a strong and independent board of directors. The experience of the board along with their in-depth knowledge of banking operarions and management will support the anchor to continue building a robust and sustainable organization. Given the strong growth of RBL over the last four year and valuation near to that of City Union Bank, we recommend to 'Long Term Subscribe' to the IPO."
Krishna Rana and Manan Divan, analysts of Sushil Finance on the IPO said," The bank has consistently growing in net income and net interest margin (NII). With an expanding reach in rural market, RBL has enehanced its brand image. Though the return on equity is around 9%, which is quite low, yet the trend is upwards.RBL plans to grow more with continous improvement in modern technology and operational improvement.
Going ahead, considering the price of Rs 225 at diluted earnings per share (EPS) of 7.91 & P/E (price over equity) of 28.45, the issue seems reasonably priced. Considering the strong management base and improving balance sheet one can invest in the IPO for medium to long term, added analysts of Sushil Finance.
While Nitin Agarwal and Renish Patel of Antique Stock Broking firm had a mix feeling on this IPO. They said," We believe that while the improving proportion of retail and robust growth trajectory does merit premium valuations but in context to muted return ratios and weak liability franchise we see little upside in the near term. Hence we recommend investors to subscribe to the issue only for 2-
3 years perspective.
However, the analysts of Antique Stock broking stating that unexpected deterioration in asset quality resulting from unseasoned loan portfolio, inability to ramp up CASA profile and moderation in growth remains the key risk.