Baring PE, others to invest 1,566 Crore in RBL Bank

Private sector lender RBL Bank Ltd said on Thursday it would raise some 1,566 crores through a preferential
allocation of shares to a group of investors led by Baring Private Equity Asia, providing the bank with
the much-needed capital to cope with the repercussions of the COVID-19 crisis, which has severely
affected many borrowers’ loan repayment capabilities.

Baring PE Asia will invest ₹1,000 crores for a 9.45% stake in the bank, making it the biggest shareholder in RBL Bank. Others who took part in the round include ICICI Prudential Life Insurance Co. Ltd, which will take a 3.13% stake with an investment of ₹330.5 crores, and private equity firm Gaja Capital, which is investing ₹150 crores for a 1.42% stake. The UK’s development finance institution CDC Group will also be investing ₹86.5 crores in this round. CDC already holds a 5.5% stake in the bank.

Advertisement

Shares will be allotted to these investors at a price of 177 per share. On Thursday, RBL’s shares closed trading at 182.1 apiece, down 1.43% on the BSE.

The funding will increase the bank’s capital adequacy ratio to 18.6%, it said, giving it headroom to tackle the impact of the COVID-19 pandemic.

This is the second time in less than a year that RBL Bank has raised equity capital, highlighting the pressure on its balance sheet in the wake of the pandemic. In December, the lender had raised 2,701 crores.

The bank’s shares have so far this year underperformed Bankex’s banking sector index. RBL shares are trading down 47.19 percent year-to-date, while the Bankex is down 31.94 percent. Earlier this year, after the troubles at Yes Bank Ltd, the lender witnessed a decline in its deposit base, which raised doubts about the health of many mid-size banks.

Following the Yes Bank episode, some institutional depositors and state government entities withdrew 3% of RBL Bank’s deposits. The lender also saw its loan book shrink. For the quarter ended 30 June, the bank reported a 2% sequential drop in net advances to 56,683 crores.

It reported a 47% decline in its June quarter net profit to 141 crores on the back of higher provisions and lower other income. The bank’s total provisions more than doubled year-on-year to 500 crores in Q1.

It has set aside 240 crores for COVID-19 provisions, taking total provisions to 350 crores, in the six months to June. The bank said 13.7% of its loan book was under moratorium as on 30 June, compared to 33% earlier. The drop was led by wholesale loans where 5% of the loans are under moratorium as compared to 22% earlier.