RBL Bank share price jumps 7% to fresh 52-week high as Emirates NBD to pick 60% stake in lender. Time to buy?

RBL Bank share price: Shares of private sector lender RBL Bank jumped over 6.5% to a fresh 52-week high following the announcement of stake acquisition by Emirates NBD, and a subsequent open offer.

The deal, amounting to ₹26,850 crore ($3 billion), is the largest ever foreign direct investment in the Indian financial services sector.

RBL Bank-Emirates NBD deal details

As part of the investment, Emirates NBD will acquire a 60% stake in RBL Bank via a preferential issue at ₹280 per share. This is at a 6.5% discount to the stock's last close.

As part of this transaction, Emirates NBD will also make a mandatory open offer for the purchase of up to 26% stake from the public shareholders of RBL Bank, in accordance with SEBI’s Takeover Regulations.

Furthermore, Emirates NBD will also amalgamate its India branches into RBL Bank as required by RBI guidelines.

Is RBL Bank a good stock to buy now?

According to analysts at Emkay Global, the transaction should boost RBL’s net worth to ~ ₹450 billion (at ~ ₹160 billion now) and capital levels (CET 1 to 39% from 13.5%), also factoring in the amalgamation of ENBD’s current India branches.

The big bang capital should meaningfully improve RBL’s LT CoF, while opening up the speed highway for organic growth via secured retail and corporate assets, thus boosting RoA as well as a potential inorganic acquisition, opined the brokerage.

Against this backdrop, Emkay raised its target multiple to 1.2x and share price target for RBL Bank by ~17% to ₹350 from ₹300, while retaining a BUY rating.

However, the brokerage cautioned that given the open offer/preferential placement at ~ ₹280/share (a discount to CMP) and thus possibly some near-term stock consolidation after a sharp run-up, returns hereon could be more back-ended, once the transaction is complete.

As per a Reuters report, CLSA analysts called the transaction a "landmark deal" for a financial services company in India, adding that benefits from the investment will be noted in the long term. The stake buy, which will also trigger an open offer for additional RBL shares, is the beginning of a new chapter for RBL, CITI analysts said.

RBL Bank Q2 snapshot

Apart from the deal with the UAE-based company, RBL Bank also announced its Q2 results. The bank posted a net profit of ₹179 crore in the July-September quarter, down 19.77% year-on-year, from ₹222.5 crore in the same period a year ago.

As per the lender, the bottom line was impacted by the MTM of ₹44 crore on unlisted equities.

Meanwhile, its net interest income moderated to ₹1,551 crore from ₹1615 crore in the corresponding quarter last fiscal.

Emkay Global said RBL Bank's 2Q results were a mixed bag, with growth rebounding to double digits and margin stabilising before inching up, while higher write-offs led to a sharp earnings miss. However, the management expects a meaningful recovery in the second half of the fiscal year 2025-26 (FY26).

RBL Bank share price trend

Against this backdrop, RBL Bank share price jumped nearly 7% to the day's high of ₹319.65 on the BSE, also its 52-week high level.

The stock has seen a sharp turnaround in its shares this year. It has delivered multibagger gains, with the scrip gaining 102% on a year-to-date basis. In the last six months, RBL Bank stock has risen 74%.

As of 10.08 am, RBL Bank shares were higher by 6.64% at ₹319.40 apiece.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.