Rating- HOLD; RBL Bank- Aggressive retail growth plans
时间:2024-06-26 13:46:29 阅读(143)
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.
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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.
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- bi, Daiichi Sankyo has said that going ahead with the open offer at this stage would be “illegal”, “an abuse of process of law”, and “gross overreach” of the pending proceedings before the Delhi High Court and also in violation of the orders of the Supreme Court. The market regulator should, therefore, hear it out before taking any call on the IHH’s proposal, it said.
The Japanese pharma major is also filing a plea before the Delhi HC seeking appointment of forensic auditors to analyse transactions involving IHH, Fortis Healthcare and RHT, Singapore, as directed by the HC on October 18.
The development is likely to create legal hurdles and delay the proposed open offer as IHH had recently told FE that it could only go ahead if Sebi agreed with its legal interpretation that the SC’s September 22 order has lifted all such restraints.
IHH managing director and CEO Kelvin Loh told FE on November 9 that the company would like to go ahead with the open offer “as soon as possible” as there has already been a delay of four years. Ravi Rajagopal, chairman of Fortis Healthcare, had added that their legal counsel has advised that the company can go ahead with the open offer as the SC order has disposed of various appeals, including the suo motu contempt. “We have represented to the Sebi and the matter is with them,” Rajagopal had said.
However, legal observers told FE that the matter is not that straightforward and simple as the Delhi HC has to take the final call on the matter of open offer as well as whether a forensic audit has to be done in the share sale which was executed in 2018.
Also Read: IHH to float open offer for Fortis if Sebi concurs with our legal view: MD & CEO
Loh and Rajagopal had said the possibility that the matter may take a different turn when it comes up in Delhi HC cannot be ruled out.
IHH had in July 2018 acquired a 31% stake in Fortis Healthcare for Rs 4,000 crore through the bidding route. It had also earmarked Rs 3,000 crore to make an open offer for an additional 26% to the public shareholders as required under the law.
Daiichi has written to Sebi that the SC in its September 22 order had asked the HC to consider ordering a forensic audit into the dilution of FHL shareholding, repeated violation of undertakings and assurance by former FHL promoters — Malvinder and Shivinder Singh — and the transaction between FHL, IHH and the clandestine transfer of Rs 4,666 crore to RHT Singapore.
Daiichi is “severely prejudiced” with IHH’s clandestine attempt to subvert the status quo order directed by the SC on December 14, 2018, and September 22 with respect to the conduct of forensic audit and the pending proceedings before the HC by purportedly consulting regulatory authorities, including Sebi, on the proposed FHL-IHH transaction. It has reiterated that the FHL-IHH transaction was currently sub-judice before the HC where FHL is also a party, its solicitors, P&A Law Offices, have said in the letter.
“We further state that any such attempt by FHL and/or IHH to proceed with the FHH-IHH transaction would be in direct contravention of the HC and SC orders,” the letter sent by the law firm has stated. Daiichi Sankyo is pursuing the enforcement of Rs 3,500-crore arbitration award against the Singh brothers pronounced by a Singapore tribunal for concealing information when they sold Ranbaxy Laboratories to it for $4.6 billion in 2008. The apex court had in 2018 put on hold the sale of Fortis Healthcare to IHH on a contempt plea filed by the Japanese drugmaker against the Singh brothers.