RBL Bank: QIP Issue – A Key To Success

RBL Bank: QIP Issue - A Key To Success!

The private sector lender RBL Bank’s performance on the bourses in 2019 is full of ups and down.

After a runaway success to a year high, the lender succumbed to selling pressure – losing nearly 70% in valuations – in reaction to its wobbly asset quality.

Investor scepticism dragged RBL Bank to a year low of Rs 230 by late October.

The lender sees its gross non-performing assets (NPA) ratio touching 2.5% in FY20, and identifying a pool of stressed loan assets (commonly referred to as watch-list) worth Rs 1,000 crore also played a part in bringing down the share price.

It has since recovered but is still quoting a 50% discount to year high level.

The recent price recovery is attributable to the fundraising initiative taken by the private lender – a key for meeting regulatory guidelines on own funds. It is looking to raise up to Rs 2,000 crore through a qualified institutional placement (QIP) offering.

The necessary approvals from the board and shareholders are already received. RBL Bank, during its Annual General Meeting, held on July 9, 2019, passed a resolution to raise equity capital.

The Bank further reiterated the possibility of raising equity capital during the analysts’ earnings post the Q2FY20 results.

It is believed to be in talks with Bajaj Holdings & Investment, Chrys Capital, and Blackstone for a proposed share sale.

The bank, in a filing, later clarified to the exchanges that no such event had occurred which required the bank to make any announcement.

The bank had posted its worst quarterly show for the July-September quarter (Q2FY20) since listing on August 31, 2016.

Given the difficult credit environment, the bank has faced challenges in a few corporate accounts.

As a matter of prudence, the bank has taken higher than required provisions on these accounts which have impacted the bank’s bottom line,” the management said while announcing Q2 results on October 22.

As per RBL Bank’s managing director and chief executive Vishwavir Ahuja, the bulk of the pain has been recognized by providing for it in the September quarter, adding there will be a lower provision in the December quarter and a small number in the fourth quarter if need be.