(Disclosure:I am market making in the shares of RBL Bank)
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RBL Bank:In the fast lane
(Disclosure:I am market making in the shares of RBL Bank)
RBL Bank, a mid-sized lender, is a potential takeover target for some larger banks. Not surprising, considering that the bank has been turned around in the last four years by its Managing Director and CEO, Vishwavir Ahuja. “Many,” says Ahuja, when asked whether any bank had approached RBL for a friendly merger.
Indeed, several old private-sector banks have been acquired in recent years. Unlike RBL (formerly Ratnakar Bank), the survival of most of them was at stake because of poor operating performance. Ahuja is confident of the future prospects of his bank. “There is no question of any merger,” he says. Clearly, the bank, under a new management since June 2010, which includes foreign bankers, is aiming big.
In the BT-KPMG study, RBL has emerged as a “Growth Winner” among mid-sized banks. It has a balance sheet size of Rs 18,198 crore and grew its deposits by 39 per cent and advances by 54 per cent in 2013/14. The three-year compound annual growth rate (CAGR) in deposits as well as advances is over 70 per cent. The fee income jumped 110 per cent in 2013/14. The number of branches has jumped from 80 in 2010 to close to 200 now. “We are very much in the interim phase in our long journey,” says Ahuja.
RBL, under Ahuja, actually went and bought the credit card business of Royal Bank of Scotland in August 2013. In the last four years, Ahuja has revamped the top management, raised capital from marquee names, rebranded its identity as RBL, and launched Internet banking, among other business initiatives.
RBL focused on small and medium enterprises when Ahuja took over. The total size of the loan book was just Rs 900 crore and the bank also had a negative return on equity (ROE) in 2010. Today, all its businesses have been expanding at a scorching pace, expanding anywhere between four and 10 times in the past four years. Its loan book is now about Rs 9,835 crore and it has an ROCE of 5.12 per cent.
“We want to be a mass-banking institution rather than an urban-centric bank,” says Ahuja. The bank already has a presence in 13 states and will expand to 17 states next year and 20 states in 2016.
The next trigger for the bank’s growth will come from its IPO, according to Ahuja. “We will raise a significant chunk of capital in the near future,” he says. But there are challenges ahead. The big private banks, including HDFC Bank and ICICI Bank, are expanding into rural and semi-urban India, a thrust area for RBL. The Reserve Bank of India’s new differentiated licensing mechanism will create new payment and small banks focused on rural and semi-urban centres. But Ahuja remains unfazed. “The competitive landscape will definitely change in the future, but there is enough space for everyone,” he says-from Business World
(Disclosure:I am market making in the shares of Ratnakar Bank)
Ahuja and his team have hoisted the sails of RBL to favourable winds. Its net advances and demand deposits soared over 50 per cent to Rs 9,835 crore and Rs 2,341 crore, respectively, in the past four years. In terms of size, it logged assets worth Rs 18,198 crore last fiscal and added 51 branches, widening its overall reach to 185 branches and 350 ATMs, with more than five lakh clients.
While intending to grow at a fast pace, RBL has managed to trim instances of credit defaults and a resultant NPA pile-up. Its gross and net NPAs stood at 0.79 per cent and 0.31 per cent, respectively — among the lowest in the industry. RBL has grown in the range of 40-50 per cent across key business parameters, making it the ‘Fastest Growing Small Bank’ in the BW | Businessworld-PwC Best Banks Survey 2014.
“Fast growth was part of the plan,” says Ahuja. “We were a small bank, with a balance sheet size of less than Rs 2,500 crore in 2010. Now, we are above Rs 20,000 crore and growing. We’re operating on a small base, but it’s more difficult to grow a small bank in a market with so many sophisticated players. It becomes even more difficult when there are legacy issues to sort out.”
The bank is focusing on expanding its customer base and not particularly the balance sheet. Mid- and low-market rural customers are still its focus. The bank has reached out to smaller markets in Gujarat, Karnataka, Maharashtra and Madhya Pradesh. It disburses about one-third of its loans to farmers, small businesses and low-income consumers.
“Our model is more credit-led than deposit-led,” says Ahuja. “Our development banking/ financial inclusion vertical is initially credit-led. Once you have sufficient penetration and basic savings accounts, the pipeline is in place. That is when we lay out our other products — starting from a basic account to small remittances, then some balances and some other products.”
RBL plans to hit the equities market with a public offering, which market sources say may be worth Rs 1,250 crore. Besides raising capital, the public issue would provide an exit route to many of RBL’s private equity investors. “The top five-eight investors will stay with us even after the IPO,” predicts Ahuja. –from BusinessWorld
(Disclosure:I am market making in the shares of RBL Bank)
RBL Bank, formerly known as Ratnakar Bank, plans to raise funds through an initial public offer which will hit the market in the next 8-9 months.
“We are preparing ourselves for the IPO and it may hit market in 8-9 months. It would not happen this fiscal but next calender year,” RBL Bank Managing Director Vishwavir Ahuja told PTI.
The quantum of offer has not been finalised by the board of the bank, he said, adding that the decision will be taken in the next few months after taking into account various factors including Basel III requirement.
The bank has been able to build scale and size in the last four years so that it gets right valuation, he said.
The capital is required for the next phase of operation as the bank has already done with transformation stage, he said, adding it has got high technology and risk management system.The bank services more than 6 lakh customers and has a total business size of over Rs 26,000 crore. As of September total deposits were Rs 12,000 crore while advances stood at Rs 14,000 crore.
The bank posted a net profit of Rs 87 crore for six months ended September 2014, while for the entire 2013-14 the profit stood at Rs 93 crore.
“So we have almost matched the net profit of the last fiscal in the first two quarters of the current financial year,” he said.-from ET
Disclosure:I am market making in the shares of RBL Bank
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