RBL Bank To Have Open Offer Before Emirates NBD Is Allotted Shares

Emirates NBD will invest $3 billion in RBL Bank Ltd., which will trigger an open offer, following which the Dubai-based bank will be allotted shares, according to Chief Executive Officer R Subramaniakumar.

The second largest bank of Dubai will buy a 60% stake in the Indian private bank through a preferential allotment. For the investment, up to 41.6 crore shares at Rs 280 apiece will get allotted to Emirates NBD on a preferential basis. An open offer is a consequence of preferential allotment, he said in the second-quarter conference call on Sunday.

The open offer will take place after all regulatory approvals. Preferential placement will be followed 15 days post open offer, he said.

Post the investment, RBL Bank's net worth will increase to Rs 42,000 crore, Subramaniakumar said. The deal will conclude in April, and after that, RBL Bank will be a listed entity of Emirates NBD.

The merger requires approval from the Reserve Bank of India, Securities Exchange Board of India, and Competition Commission of India, he said.

The fund infusion will likely support RBL Bank to scale the existing business. RBL Bank will continue to focus on low-cost retail deposits. The private bank is unlikely to compromise the core banking business, he said.

Subramaniakumar is also seeing rating upgrades in the upcoming time. The gap between the cost of funds for large private banks and RBL Bank Ltd. will narrow down over time.

According to him, the return on assets will expand materially given the large infusion of equity.

India allows 74% foreign investment in private banks, but limits shareholdings of any single foreign institution to 15% unless the regulator has approved.

The Reserve Bank of India has given informal approval for the deal, as per a Reuters report.

As per the agreement, post fund infusion, the current management will continue at the top level, according to the CEO. The board structure will be in the ratio of 50:50. Around 50% will be independent directors.