The lender will raise the sum via a preferential share allotment to combat covid effect
Baring PE Asia will invest ₹1,000 crore for a 9.45% stake in the bank, making it the biggest shareholder in RBL Bank
Private sector lender RBL Bank Ltd on Thursday said it will raise ₹1,566 crore through a preferential allotment of shares to a group of investors led by Baring Private Equity Asia, providing the bank with the much needed capital to deal with the fallout of the covid-19 crisis, which has severely impacted the loan repayment capabilities of many borrowers.
Baring PE Asia will invest ₹1,000 crore 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 crore, and private equity firm Gaja Capital, which is investing ₹150 crore for a 1.42% stake. The UK’s development finance institution CDC Group will also be investing ₹86.5 crore in this round. CDC already holds a 5.5% stake in the bank.
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 crore.
So far this year, the bank’s shares have underperformed the banking sector index Bankex. Year-to-date, RBL shares are trading down by 47.19%, while the Bankex is down 31.94%. The lender witnessed erosion in its deposits base earlier this year, after the troubles at Yes Bank Ltd, which resulted in creating doubts on the health of several mid-sized 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 crore.
It reported a 47% decline in its June quarter net profit to ₹141 crore on the back of higher provisions and lower other income. The bank’s total provisions more than doubled year-on-year to ₹500 crore in Q1.
It has set aside ₹240 crore for covid-19 provisions, taking total provisions to ₹350 crore, 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.
“Given the uncertain environment, the bank is likely to focus on preserving balance sheet quality. The management’s current stance is that the present capital levels are unlikely to be depleted. In this backdrop, growth is likely to take a backseat," brokerage Nirmal Bang said in a report on 29 July.
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