Emirates NBD eyes RBL Bank stake for India, Asia play

Time of India

02-07-2025

MUMBAI: Emirates
NBD Bank PJSC
, owned by the
Dubai government
, is exploring the acquisition of a significant minority stake in
RBL Bank
as it looks to expand its footprint in Asia, said people aware of the matter. The investment in the form of a preferential allotment is expected to be a primary infusion of capital into the Indian private sector lender bank, they said.
RBL is 100% publicly owned with several domestic institutions owning small stakes. The bigger of these are held by Quant Mutual Fund (6.65%), Nippon Life India (3.11%),
ICICI Prudential Life
(1.06%) and Life Insurance Corp. of India (1.19%).
Mahindra and Mahindra
has a 3.48% shareholding that was acquired in 2023, while Nithin Kamath-led Zerodha owns 1.24%. British International Investment, the UK's sovereign investment arm, sold its 3.82% stake in April.
The shares of the widely held Indian private bank jumped over 4% on Tuesday, extending gains for the fourth consecutive session. Its shares have galloped over 21% in the past month and over 64% in the past six. It's risen over 7% in the past five days. It closed at Rs 259.95 on the BSE Tuesday, up 4.6%, for a market value of Rs 15,831.21 crore.
The deal structure will be somewhat similar to the recent SMBC-Yes Bank transaction, said the people cited. Here too, the UAE bank is likely to end up owning around 15-20% of the expanded equity capital base, below the open offer threshold, subject to regulatory approvals. That would translate to a Rs 3,166.24 crore investment. However, the deal is likely to take place at a premium to the current price, said one of the sources.
The stock, which recorded gains in seven out of the past eight sessions, is still trading slightly below its book value, making it one of the cheapest in the sector, analysts said. It currently has a P/E ratio of over 21.
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To be sure, talks may remain inconclusive and fail to result in a transaction, said the people cited. The bank is also exploring the raising of capital from institutional investors as a backup option.
RBL and
Sharad Agarwal
, CEO of Emirates NBD in India, didn't respond to queries.
The Indian lender's leadership has been closely following developments in Yes Bank and is keen on a similar transaction. Emirates NBD, which has been in pursuit of
IDBI Bank
since 2023, is said to have zeroed in on RBL in recent weeks, working closely with an advisor.
The Reserve Bank of India (RBI) had in May granted in-principle approval to Emirates NBD Bank PJSC for setting up a wholly owned subsidiary (WOS) in India through the conversion of its branches in Chennai, Gurugram and Mumbai. The Dubai bank recently launched investment banking services in the country.
'There is a deep connect between UAE and India, both diplomatic and commercial. The bank has been eyeing opportunities but has not been very keen to buy into NBFCs (non-banking finance companies) unlike some of their peers,' said an industry executive. 'There is also a lot of synergy in wealth and other product distribution.'
Emirates NBD is the second-largest bank in the UAE and fourth among
Gulf Cooperation Council
(GCC) countries. If a transaction materialises, this will be the second investment from West Asia this quarter in an Indian bank. In April, Abu Dhabi Investment Authority (ADIA) and Warburg Pincus agreed to deploy Rs 7,500 crore in IDFC First Bank to fuel the lender's next phase of growth.
RBL Bank was started 70 years ago in Maharashtra as a local bank. The lender began its reinvention as a pan-India bank in 2010 with the induction of professional management, bringing in large institutional investors and infusing capital, along with investments in technology, people, branches and branding.
Its greater focus on credit cards and microfinance is seen as a differentiated asset strategy, albeit prone to cycles. Analysts see a slowdown in growth in its core segments and stress in unsecured lending as key risks. March quarter net profit fell 80% to Rs 68.7 crore, despite an increase in other income, from the December quarter. Other income for the quarter stood at Rs 1,000 crore. The lender's net interest income (NII) fell 2.3% from the year-ago period to Rs 1,563 crore in the March quarter, while asset quality was lower compared with the preceding (yes) one.
'Business growth is gaining traction and slippages are expected to normalise by 2QFY26,' said Motilal Oswal analyst Nitin Aggarwal. 'Margins will be flattish to lower before it will claw back up. The trajectory is expected to improve starting FY26. The cards business is expected to grow in the mid-single digits.'