RBL Bank to Receive $3 Billion Investment from Emirates NBD, Triggering Open Offer
Emirates NBD, the second-largest bank in Dubai, will invest $3 billion in RBL Bank Ltd., triggering an open offer and altering the Indian private bank’s shareholding structure. According to RBL Bank’s Chief Executive Officer, R Subramaniakumar, the investment will lead to the allotment of up to 41.6 crore shares at Rs 280 apiece on a preferential basis.
Investment and Open Offer
The open offer, a consequence of the preferential allotment, will take place after all regulatory approvals have been obtained. The preferential placement will be followed by the open offer, which is expected to conclude in April. Post-investment, RBL Bank’s net worth will increase to Rs 42,000 crore, and the bank will become a listed entity of Emirates NBD.
Regulatory Approvals and Deal Conclusion
The merger requires approval from the Reserve Bank of India, Securities Exchange Board of India, and Competition Commission of India. Although the Reserve Bank of India has given informal approval for the deal, the formal approval process is still pending. The deal’s conclusion will mark a significant milestone for RBL Bank, enabling it to scale its existing business and focus on low-cost retail deposits.
Impact on RBL Bank’s Business
The fund infusion is expected to support RBL Bank in expanding its business, with a focus on low-cost retail deposits. The private bank is unlikely to compromise its core banking business, and the investment will likely lead to rating upgrades in the future. The gap between the cost of funds for large private banks and RBL Bank Ltd. will narrow down over time, making the bank more competitive in the market.
Return on Assets and Equity Infusion
According to Subramaniakumar, the return on assets will expand materially given the large infusion of equity. This is expected to have a positive impact on the bank’s profitability and overall performance. The investment will also lead to a significant increase in the bank’s net worth, providing a strong foundation for future growth.
Foreign Investment in Indian Private Banks
India allows 74% foreign investment in private banks, but limits shareholdings of any single foreign institution to 15% unless the regulator has approved. In this case, Emirates NBD will acquire a 60% stake in RBL Bank, which is subject to regulatory approvals. For more information on foreign investment in Indian private banks, please visit our website.
Management Structure and Independent Directors
Post-investment, the current management will continue at the top level, according to the CEO. The board structure will be in the ratio of 50:50, with around 50% independent directors. This will ensure that the bank’s management and board composition remain stable and effective.
Conclusion
In conclusion, the $3 billion investment from Emirates NBD will have a significant impact on RBL Bank’s business and shareholding structure. The open offer, preferential allotment, and regulatory approvals will all play a crucial role in the deal’s conclusion. For more information on Indian banking sector news and foreign investment in India, please visit our website.
