RBL Bank Ltd. share price target

RBL Bank (RBL), formerly known as Ratnakar Bank Ltd is a Scheduled Commercial Bank (SCB). It is one of India's fastest growing Private Sector Banks. It offers a comprehensive range of banking products and services customized to cater to the needs of large corporates, small and medium enterprises (SMEs), agricultural customers, retail customers and development banking & financial inclusion (low income) customers. It has been expanding its presence across India through a growing network of branches and ATMs and upgrading its traditional delivery channels with...

We are bullish on the prospects of RBL Bank (RBL) given that the management has proven capabilities to build a world class franchise. And performance of the Bank over the period FY10-16 is testimony to its capabilities. Advances and deposits have grown at a robust pace of 62% & 58% respectively, while NII and earnings have followed suit growing at 55.1% and 58%. This scorching pace of growth has been without...

Strong management team & focused approach to drive growth: The new Management led by MD & CEO Mr Vishwavir Ahuja which took charge in 2010 has been instrumental in the outstanding growth of the bank over the years, wherein the bank transformed itself from being a traditional bank to a new age bank. RBL has been largely focusing on funding working capital to large and midsized corporates. It has recently ventured into retail lending by buying out the credit card business of Royal Bank of Scotland (RBS) and has been expanding its retail business by introducing other new retail-centric products.

Outlook and Valuation: Currently the stock is valued at 2.3x its FY2018E BV of `130; this we feel is quite attractive given the growth prospects of the bank. Changing business mix & stable credit cost are expected to lead to a predictable earnings growth. While the ROE improvement could be gradual, we believe absolute growth in earnings could accelerate going ahead. RBL in our view has all the ingredients to become a multi-year growth story with a stable asset quality. Keeping this in mind, feel the stock should be valued at 2.5x its FY2018E BV. They recommend ACCUMULATE on the stock with a target price of `325.

RBL Bank Ltd, incorporated in 1943 as a regional bank in Maharashtra, Mumbai is an India based private sector bank offering range of banking products and services to large corporations, SMEs, agricultural customers, retail customers and development banking & financial inclusion (low in19th Aug-23rd Aug come) customers. As of March 31, 2016, RBL had 197 branches and 362 ATMs spread across 16 Offer Period Indian states serving over 1.9 million customers. RBL acquired certain Indian businesses of the...

RBL Bank Limited, one of India's fastest growing private sector banks in the last six years. It has cultivated a customer centric culture where it uses industry domain knowledge, experience and technology with the goal of satisfying the client's complete banking needs. The Bank offers a comprehensive range of banking products and services customized to cater to the needs of large corporations, small and medium enterprises (SMEs), agricultural customers, retail customers and development banking & financial inclusion (low income) customers. It has been expanding its presence across India through a growing network of branches and ATMs and upgrading its traditional...

Background: RBL bank Ltd came into operations in 1943 and was incorporated as a small, regional bank in Maharashtra with two branches in Kohlapur and Sangli. It is one among the fastest growing private sector banks in the last six years and now has 197 interconnected branches and 362 interconnected ATMs spread across 16 Indian states and union territories serving ~1.9mn customers. The bank offers a comprehensive range of banking products and services customized to cater to the needs of large corporations, SMEs, agricultural customers, retail customers and development banking & financial inclusion (low income) customers. Loan book of the bank grew at a CAGR of 50.5% for the past 4 years and now...

RBL Bank (RBL), a scheduled commercial bank with a 73 year-old operational history, has been one of the fastest growing private sector banks in the last six years. It offers a comprehensive range of banking products and services to cater to the needs of large corporates, SME, agricultural & retail customers and low income customer. As of March 2016, advances were at | 21229 crore, which represents a strong CAGR of 50.54% in FY12-16.

Financial Performance
RBL’s credit book grew at a strong pace of 50.6% CAGR in FY12-16 to | 21229 crore. Margins were close to 3% in the previous two fiscals with NIMs at 2.96% as on FY16. RBL earned a profit of | 292.5 crore as on FY16, representing a strong CAGR of 45.6% in FY12-16. The asset quality has been prudent with GNPA at 0.98% and NNPA at 0.59% as on FY16. RoE and RoA as on FY14 were at 5.44% and 0.66%, respectively, which improved in FY16 at 11.32% and 0.98%, respectively.

Valuation
Considering the P/E valuation on the upper end of the price band of Rs. 225, the stock is priced at
pre issue P/E of 25.23x on its FY16 EPS of Rs. 8.92. Post issue, the stock is priced at a P/E of 28.94 x on
its EPS of Rs. 7.78. Looking at the P/B ratio at Rs. 225 the stock is priced at P/B ratio of 2.51x on the
pre issue book value of Rs.89.79 and on the post issue book value of Rs. 107.11the P/B comes out to
2.10x. On the lower end of the price band of Rs.224 the stock is priced at pre issue P/E of 25.12x on
its FY16 EPS of Rs. 8.92.Post issue, the stock is priced at a P/E of 28.81x on its EPS of Rs. 7.78. Looking
at the P/B ratio at Rs. 224, the stock is priced at P/B ratio of 2.49x on the pre issue book value of Rs.
89.79 and on the post issue book value of Rs. 107.11 , the P/B comes out to 2.09x.

Outlook
The bank has been consisting delivering on improving asset quality, cost efficiency and
other income since last 4-5 years. Consistent rise in non-performing assets hit balance
sheets of banks but it is maintaining its capital requirements under the Basel III
Requirements as per the RBI's new capital adequacy guidelines. 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.

RBL Bank Ltd (RBL), the erstwhile Ratnakar Bank, has emerged as one of the fastest growing private sector banks in the last six years. Members of the new Management team, with their experience across multinational and other private banks, have played an instrumental role in the metamorphosis of the bank . Focused approach will keep growth..

Outlook Valuation: 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.