RBL Bank shares gain after Emirates NBD stake sale reports — Here’s what the norms say

Shares of RBL Bank Ltd. gained on Tuesday, October 14, after a MoneyControl report on Monday, stated that the Middle East bank Emirates NBD is in advanced talks to acquire a majority stake in the lender.The report stated that both parties have been in talks for the last few months and Emirates NBD is keen on picking up more than 51% stake in RBL Bank.

RBL Bank’s current market capitalisation is at ₹17,800 crore, which implies the deal to be valued at more than ₹9,900 crore.

Earlier reports had indicated that Emirates NBD was in the fray for a stake in IDBI Bank, along with other suitors like Fairfax, Oaktree and Kotak Mahindra Bank.RBL Bank is targeting its Return on Assets (RoA) to reach 1% by the end of the ongoing fiscal compared to 0.56% in the first quarter. It currently trades at a one-year forward price-to-book multiple of 1 times.

Where do regulations stand?

Voting rights for a single investor in a listed private bank cannot exceed 26% as per the current norms.

Any change in raising voting rights beyond 26% will require legislative changes, as this ceiling is prescribed in the Banking Regulations Act.

Such changes will be time consuming and will require the RBI to first make a formal recommendation, as per experts.

Recent Banking Deals

IDFC First Bank and Yes Bank have seen deals from foreign institutions recently.

While a Warburg Pincus unit, Currant Sea Investments BV, acquired a 9.99% stake in IDFC First, Sumitomo Mitsui Banking Corporation received approval from the Reserve Bank of India to increase its stake in Yes Bank to 24%.

RBL Bank shares were up 2.1% at ₹296 apiece around 9.20 am. The stock has gained 9% in the past month, 63% in the last six months, and 87.5% this year, so far.

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