Aditya Birla Group companies, Reliance Capital, BNP Paribas and Credit Suisse are among half a dozen investors that have cornered a substantial chunk of Rs 2,000-crore equity sale by the private sector RBL Bank. The fastest growing small-sized private bank, which recently raised concerns because of its holding in real estate, construction, power and NBFCs, attracted as many as 89 investors, especially foreign portfolio investors, domestic mutual funds, insurance industry and alternative investment funds. The bank raised Rs 2,000 crore at a price of Rs 351 per share.
RBL Bank needed capital for growth, expansion of retail franchise and also as a cushion for any provisioning against bad loans. The challenging operating environment with corporates still to come out of the woods is creating fresh challenges. Post the IL&FS debacle and credit squeeze, the bank is witnessing stress in its portfolio. The gross NPAs have moved up in the first half of 2019-20 from 1.28 per cent in June quarter to 2.6 per cent in the September quarter. The bank's stock price also took a beating on asset quality concerns. The stock crashed from a high of Rs 716 to Rs 230 per share in a year. It, however, recovered to Rs 334 per share.
Aditya Birla Group companies, especially mutual fund and insurance companies, have cornered a major 10.37 per cent of the total issue of Rs 2,000 crore. Reliance Capital, through its mutual fund arm, received 9.40 per cent of the issue. BNP Paribas, Bajaj Finance, Credit Suisse ( Singapore) and Theleme got around 7 per cent in the equity offering.
The fresh capital would boost the bank's capital adequacy ratio. The current capital adequacy is at 11.80 per cent as of September 2019 and tier-I capital at 10.86 per cent. The regulatory requirement is for a minimum of 10.87 per cent and 8.87 per cent, respectively. In fact, many private banks have raised or are raising fresh capital to boost their capital adequacy for provisioning against the bad loan.
Big individual companies have also invested in the bank's equity offering. BNP Paribas has invested Rs 160 crore followed by Pune-based Bajaj Finance (Rs 150 crore), Credit Suisse (Rs 140 crore) Bajaj Allianz Life (Rs 86 crore) and Societe Generale (Rs 75 crore).
The market is now keenly awaiting the asset quality numbers for the December quarter. The bank's second quarter was not very encouraging. The income was down marginally from Rs 2,022 crore in the June quarter to Rs 267 crore in the September quarter while the net profit crashed from Rs 267 crore to Rs 54.31 crore.
In the second quarter investors' call, Vishwavir Ahuja, the MD & CEO of the bank, reasoned that the deterioration in credit environment has had some impact on the bank, which was more than the bank initially anticipated. He also listed out things such as slower resolution, higher stress in the system, market volatility and poor coordination between lenders as some of reasons for the challenging credit environment.