RBL Bank: No Insider Trading worries, Expect growth of ~20-25%.
Dated: 5th September 2019
Update on the Indian market:
After the big fall on Tuesday, NIFTY opened lower on Wednesday but recovered towards the close of the day at 10,845, up 0.4%. Amongst the NSE 50, top gainers were Tata Steel (+2.9%), BPCL (+2.8%) and IOC (+2.8%) while the worst performers were Maruti (-4.0%), Sun Pharma (-3.0%) and Britannia (-3.0%). In the Sectorial Nifty Indices, the Metal (+1.6%), Bank (+1.1%) and Financial Services (+1.0%) were top gainers while Auto (-1.7%) was the worst performer followed by Media (-0.6%).
RBL Bank: No Insider Trading worries, Expect growth of ~20-25%.
Key takeaways from the interview of Mr Vishwavir Ahuja, MD & CEO, RBL Bank; dated 29 August 2019 with ET Now:
· Some articles hinted insider trading activity led big drop in the RBL Bank stock price after Coffee Day Chief VG Siddhartha had gone missing. Clarifying on these accusations, Mr Ahuja said that the 27 employees who sold RBL shares on 30th July 2019 were mid or junior level staff and it was a routine activity. The transactions were within the stipulated guidelines of SEBI.
· The company did not receive any request form SEBI asking for clarifications on the above transactions. There was no breach of code. None of the transactions was done by any of the key managerial personnel. ~3 lakh shares were traded which is not a very large volume.
· On being asked about the banks’ exposure to Coffee Day Enterprises Ltd; Mr Ahuja replied that RBL Bank does not make any comments on any specific exposure or specific clients.
· The Capital Adequacy Ratio of RBL Bank is healthy at 12.5% and the management doesn’t expect requirement of any capital infusion for the coming 9-12 months even at reasonable levels of growth.
· The corporate growth will be relatively low in the given environment and other factors; the overall growth for the bank is likely to be in the 20-25% range.
· Amidst the Agri crises, RBL Bank will remain un-impacted due to low exposure to the Agri loans (to the tune of ~2-2.5% of the portfolio).
Consensus Estimate (Source: market screener website)
· The closing price of BLSTR was Rs 324/- as of 04-September-19. It traded at 1.6x / 1.3x / 1.1x the consensus book value for FY 20E / FY 21E / FY 22E of Rs 208 / 242 / 287 respectively.
· Consensus target price of Rs 548/- implies a P/BV of 1.9x on the FY22E book value of Rs 287/-
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