Shares of RBL Bank rose 20% in a day. Should you invest?

on BSE, RBL Bank settlement of shares up to 122.25 18.15 or 17.44%. Shares saw intraday highs 124.90 each – resulting in an overall increase of 19.98% on the day.

Bank Market capitalization is around 7,329.07 crore on Dalal Street.

On Tuesday, shares of RBL Bank announced that it has sold the balance amount of 3,50,000 equity shares representing 1.02% (entire equity shareholding) of Kilburn Engineering’s paid-up share capital.

In Kilburn, RBL Bank is selling its stake in multiple tranches from May 17 to August 23, 2022. So far, the bank has sold 67,50,000 equity shares representing 19.67% in Kilburn in total. 30.61 crores. Now, the bank does not hold any equity shares of Kilburn.

Earlier this week, the board of directors of RBL Bank had approved issuance of debt securities from time to time on private placement basis. 3,000 crores.

Should you invest in RBL Bank shares?

In the investor meeting with the new MD and CEO of RBL Bank, R Subramaniakumar, Emkay Global highlighted that the bank is expected to adopt a more calibrated-growth approach in FY13 and onwards, compared to the earlier is opposite.

Emkay analysts Anand Dama, Heet Khimawat, Dixit Sankharwa and Saumya Jain said in their note dated August 22, “The bank expects a growth of ~15% (+/- 10%) in FY23 on a low basis, but Sustainable growth is projected. Thereafter at 20-25%. Thereafter, the focus will be on delivering diversified and granular growth with higher share of secured assets. That said, to re-accelerate growth in the bank cards business. While the MFI book is largely behind On the secured retail front, there will be more focus on mortgage/vehicle loans, while the bank will improve asset-portfolio tenure and build a healthy SME portfolio to support CASA mobilization.”

On asset quality, analysts said in the note, “We believe that some intermittent asset quality hiccups cannot be ruled out completely, especially when the external environment is fragile and internal stresses Identity standards are being strengthened.”

On valuation, these analysts said, “We believe that the current disappointing valuation (0.4x FY24 ABV) largely ignores the new management strategy (which in our view is appropriate), which is now focused on sustainable growth/returns.” We also take comfort from the bank’s high capital level (Tier I -16%). We recommend buy on RBL Bank for ready investors to watch out for near term transitional pain to gain in long term.”

Among the key risks for the bank, the analysts highlighted in their note – lack of high-level management hindered the growth/asset-quality improvement story; and break-up of card tie-up with BAF.

On the other hand, after the Q1 result, ICICI Securities in its note said, “Constructing in a higher cost structure being in an investment mode, we are expected to reduce our earnings estimates for FY23E/FY24E to 5%/6% respectively.” Overall, we expect it to deliver RoAs of 1.0-1.1% and RoEs of 8-10% in FY23E/FY24E.”

RBL Bank is one of the leading private sector banks in India with a growing presence across the country.

In Q1FY23, RBL Bank made a net profit of 201 crore as compared to a net loss of 459 crore in the same quarter last year. Net Interest Income (NII) Up 6% from 1,028 crores 970 crores in Q1FY22. The bank’s provisions declined and asset quality improved.

As on June 30, 2022, the bank has 502 bank branches and 1,302 business liaison branches, out of which 289 are banking outlets. RBL Finserve, a 100% subsidiary of the Bank, has 789 business linkage branches.

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.

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