RBL Bank formerly Ratnakar Bank Ltd is going to launch its maiden IPO very soon. Here are the
brokerage / research recommendations on the
IPO of RBL Bank LtdAmbit Capital Analysts said,
RBL Bank’s spectacular balance sheet growth (FY13-16 CAGR: 53%) has been driven by high reliance on the wholesale banking model. However, RoA/RoE appear to be hitting air-pockets on NIM and cost income- ratio. The bank needs to build a granular balance sheet to lift NIM, but its already high cost-to-income ratio (disappointing given the current wholesale focus) and limited track record in that direction make the progress suspect. Asset quality trends are healthy so far, but concentration in sectors like construction and MFIs betrays a lack of strong niche. We struggle to justify a valuation more than 2x FY17BV using peer benchmarking, which supports an issue price of ~Rs 205/share.
NVS Wealth Manager has the following Review,
At the issue price of Rs.225 per share, the IPO is priced at a PE multiple of little over 23x and P/BV of 2.2x which compares very favourably with its new age peers and considering the likely increased earnings based on current financial year 2017 as well as addition to the Net worth and increased Book value, the pricing could become much more attractive. Hence, we are confident that the bank will deliver consistent performance and provides an excellent investment opportunity for investors with a long term horizon.
Antique Stock Broking Analyst Nitin Aggarwal and Renish Patel have the following view,
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. We recommend investors to subscribe to the issue only for 2- 3 years perspective. At the upper end of issue price of Rs225per share the bank is priced at 1.75x FY18E book value and 13.8x FY18E EPS. Risks: Unexpected deterioration in asset quality resulting from unseasoned loan portfolio, inability to ramp up CASA profile and moderation in growth remains the key risk.
Angel Broking Analyst Siddarth Purohit said,
At the upper end of the price band, ie 225, the stock is offered at 2.4x its pre-IPO BV, while on post IPO BV it’s offered at 2.1x. We believe the issue is attractively priced taking into account the valuations at which other mid-sized private sector banks are currently trading. To add to it, given the growth prospects of the bank, we recommend a SUBSCRIBE to the issue.
Destimoney Securities has the following Review,
RBL Bank Ltd is coming up with a Rs. 12,130 mn (at upper price band) IPO. The issue would open on 19-Aug-2016 till 23-Aug-2016 with the price band of Rs224-225 per share. The relatively legacy free book of RBL makes it a better choice in the banking space which has banks reeling under the NPA burden. Hence, we recommend investors to SUBSCRIBE to the issue at CUTOFF keeping a 2-3 years investment horizon.
SPA Securities Analyst Deepak Tewary has the following Review,
While the stock is adequately priced at 1.96x FY16 book value, we believe that the stock can generate consistent return on back of strong earnings growth and improvement in return ratios driven by higher CASA (currently at ~19%) and lower OPEX ratio due to higher operating leverage. We recommend investors to SUBSCRIBE to the issue with long term perspective.
Arihant Capital Research has the following Review,
The issue has been offered in a price band of Rs 224-225 per equity share. At the upper price band the stock is available at P/B of 2.4 (x) based on FY 16 financials. The issue looks fairly valued against its peer group companies. We have "3 star" rating for the IPO
Sushil Finance Analyst - Krishna Rana said
The return on Equity of the Bank is around 9% which is still quite low, however the trend is upwards. The management of RBL has a rich experience and they have created an excellent platform to springboard into future growth. Asking price of 225 at diluted EPS of 7.91 & P/ E of 28.45, the issue seem reasonably priced. Given the strong management and improving balance sheet one can invest in the IPO for Medium to Long term.
Cholamandalam Securities Analyst Praveen told us,
We believe the post issue valuation at 2.1X P/BV looks attractive considering the strong growth which the company has delivered over the past four years coupled with the breadth of experience and in-depth knowledge of banking operations of Board of Directors which will help them continue to register a sustainable growth. Hence, we give out a subscribe recommendation on the IPO of RBL Bank Ltd.
Ajcon Global Analyst Akash Jain said,
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.
Aum Capital has the following Recommendation,
The Bank’s strong fundamentals with healthy asset quality, improving Cost/Income ratio, strong management with thoughtful
business strategies, softening interest rate cycle coupled with Government’s focus on economic growth, bodes well for RBL Bank. At
the higher price band of Rs.225, the Bank is valued at 2.45x of its FY16 Book Value which is lower when compared with its peers.
Hence, we recommend a “Subscribe” on the issue.
Emkay Research Analys Umang Shah and Kushan Prikh writes,
At the upper end of the price band the stock would trade at 2.4x FY16 reported BV and 2.1x on a post money basis for average pre-money ROEs of ~10% for past two years. We believe, the profitability (ROAs) could improve further if the bank is able to leverage the investments made in distribution and systems over past few years and sweat its resources efficiently. Recommend SUBSCRIBE to the issue.
Hem Securities Analyst Astha Jain writes,
At price band of Rs 224-225 bank is bringing the issue at p/b multiple of 2.2x on post issue book value of Rs 103.54. RBL Bank with its superior asset quality & strong financial growth looks to have strong potential for future growth. Hence, we recommend "Subscribe" on issue.
Prabhudas Liladhar Analysts Vidhi Shah, R Sreesankar and Pritesh Bumb recommends as follows
The Bank continues to focus on retail & working capital needs of corporate which will hold up asset quality and improve margins.
Post issue, at upper band of Rs225, RBL trades at 2.1x FY16 ABV of Rs108 (including dilution) which we believe is fully valued and should subscribe with long term view.
SMC Securities is of the Following View,
Moreover, Its provision coverage ratio is improving as well as restructured loans percentage are reducing year on year basis, which is showing that bank has been able to maintain asset quality. NPA is slightly on the higher side due to RBI's clean up balance sheet action, but management of the bank is confident to reduce that to best in the industry. Thus, investors who have long term aspect could opt for the issue
