Rating: HOLD; RBL Bank: Aggressive retail growth plans We recently met with RBL Bank’s MD and CEO, Subramania Kumar, and Executive director, Rajeev Ahuja, to discuss the bank’s newly unveiled strategy for the FY23-FY26. Since the appointment of the new MD&CEO, RBL has made significant changes in its senior management team, hiring six talented individuals externally and promoting 21 internally over the past year. The bank has also enhanced its compliance measures and sharpened its focus. RBL Bank reconfirmed its guidance of achieving a CAGR of over 20% in loans from FY23-FY26, primarily driven by the retail segment. While continuing to prioritise card services, microfinance (MFI), and commercial banking, RBL Bank aims to aggressively expand its recently launched retail products, including housing loans, vehicle loans, gold loans, and small business loans. The bank intends to target tier-2 and tier-3 locations, where there is substantial untapped demand for these secured loan products. These businesses offer higher yields and require relatively less capital. To support its growth objectives, RBL Bank plans to increase its branch network from the current count of approximately 517 branches to 800 branches within the next three years. Additionally, the bank aims to leverage its business correspondent (BC) points for lead generation, further facilitating its expansion efforts. RBL has already invested significantly into its asset platform, systems, processes, technology and feet-on-street. It thus believes a large part of fixed costs have already been incurred and that incremental costs would be volume-led. Management sounded confident of improving the sourcing of incremental business from branches vs DSAs/connectors from a ratio of 20:80 currently to 50:50 by FY24 led by improving productivity and technology stack. RBL reiterated its guidance of revenue growth exceeding opex growth and thus improving RoA by 10-20bps every year through FY23-FY26. RBL has tier-1 capital at 15.3% and believes the current levels are sufficient for the next 18-24 months. We believe RBL’s strategy to grow exponentially in secured retail products (housing, wheels, SBL, gold) is reasonably scalable, NIM-accretive and less risky though it is more cost-intensive. We build-in a loan CAGR of 15% during FY23-FY25E, which is lower than the management guidance (of 20%), due to our view of moderation in systemic credit growth and higher competitive intensity. Leadership gaps being almost filled by promoting internal talent: Under the leadership of new MD&CEO since Jun’22, RBL has filled almost every senior management role (hired 6 talents laterally and elevated 21 internally) in the past 12 months. Notable changes are Chief information officer (Ravi Pichan), Head of Corporate centre (Alok Rastogi) and has elevated Vijay Anandh as head of Retail Assets and Collections. The bank has finalised the person for CFO and Wheels head. Also read: SEBI bans IIFL Securities from signing new broking clients for 2 years RBL reiterated its FY23-FY26 strategy with >20% CAGR in loans and deposits with sharp focus on granularity. It plans to build on the existing core businesses (credit card, MFI, Commercial) and expects exponential rise in the share of new businesses (housing, gold, small business and wheels). Overall, the bank targets 10-20bps per annum rise in RoA and 100-150bps rise in RoE for the FY24-FY26 period. Retail segment is likely to be the key driver for growth. The bank expects the share of Retail business to rise to 60-65% by FY26 vs 54% now. While retaining focus on cards, MFI and commercial banking, RBL intends to aggressively grow its newly launched retail products (housing, wheels, gold, and small business loans), predominantly in tier-2 and tier-3 locations.
If the current trend continues for a longer period of time, not only oil mills but oilseeds growers will also not be able to get good rates of their produce, says Samir Shah, president of Gujarat State Edible Oils and Oil Seeds Association (GEOA). Shah who is also past president of SOMA says that due to various international factors rates of edible oils had gone up considerably, especially imported oils earlier this year.
“With a view to curb rising prices of edible oil, the Government of India reduced import duty on edible oils. Considering the fact that India is producing hardly 30 percent of its edible oil requirement, the decision was right at that point of time. Now when international prices of edible oils have gone down by 15 percent to 25 percent and high production period has started in edible oil exporting countries, the government should gradually increase import duty to protect local oil mills and oilseeds growers,” said Shah. GEOA has also made representation before Union Minister for Commerce & Consumer Affairs, Piyush Goyal to increase import duty.
In June import duty on edible oils was ranging from 35 to 55 percent, since then the government gradually reduced import duty and at present it is ranging from zero percent to 15 percent on different edible oils, he said.
Just a month back prices of edible oils were through the roof and the government took appropriate measures by reducing import duty in order to protect consumers, says Atul Chaturvedi, president of Solvent Extractors Association of India (SEA). “Prices of edible oils are coming down globally. Kharif sowing has already started across the country. In the interest of local farmers, it is high time to enhance import duty in a phased manner to encourage local edible oil value chain,” opined Chaturvedi.
On Thursday imported Palm oil prices were at around Rs 2100 per 15 kg as against local Rs 2700 and Rs 2550 of groundnut and cottonseed oils. Prices of other local oils including ricebran, coconut, soyabean and mustard remained as high as Rs 2350, Rs 2520, Rs 2500 and Rs 2580 respectively.
India imports around 13-13.5 million tonnes of edible oils, of which around 8-8.5 million tonnes (around 63 per cent) are palm oil. Though the price of other imported Sunflower oil remained at around Rs 2700 per 15 kg, but import quantity of the oil is much lower than that of palm oil.