RBL BANK - Is it a Good Long Term Story?

Please point to the place in my entire post where I used the word ‘fishy’ or ‘suspicious’. I simply pointed out that the bank’s targets are ambitious. I even concluded by saying that if the investor believes the targets can be met without considerable shareholder value dilution, then I am not going to argue with that anymore.

Equity Dilution is not uncommon in Banking companies. So, it’s not a question of ‘Why?’, rather a question of ‘How much?’

Again, this ties back to my previous observation. I am simply quoting the company’s own employees saying how much capital they would require. If all that dilution makes sense for you as an investor, then more power to you.

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Good analysis. U were prescient with Edelweiss as well when entire world was gung ho on it n itnwas reaching new ATH. Kudos. Keep up the good work.

Dinesh - thanks for your note. A few points here. The Vision 2020 wasn’t something invented now. They have had it in their presentations in quantified format (30-35% Cagr etc) since Q2 FY17. See here: https://ir.rblbank.com/pdfs/financial-highlights/Investor_Presentation_Q2_FY17.pdf

Second, This concept of financing profit is incorrect, IMHO. (there’s no concept of EBIDTA in a bank - you have to take out interest, but anyhow) For instance 2016 was other income of 491 cr. (correct) but where did the 477 cr. number come from? It might be that you are considering that all costs for the bank relate to only the financing business- which is not true. From trading, to fees, to card costs etc. there are substantial costs related to fee income only, which therefore should not be conflated with the financing costs (even part of branch costs are fee income related).

Third, income from investments is required to be noted as interest income. You as a bank are reuqired to put 20% of your deposits in govt bonds. This generates income from investments. If you remove that, you should remove the 20% of interest paid on deposits as well, which is not really the right thing to do. The interbank and RBI interest isn’t much - just 70 cr.

Fourth, you don’t look at a fund raise as % of equity or reserves. You look at it as primarily about how much it will dilute the bank’s equity, and how much it will change the basel capital ratios and for how long. The dilution is not 50% or anywhere close to it. If anything, it might be 10%, and yes, it will substantially reduce RoE until they get to use the capital properly.

Q1 provisions are higher, perhaps and that’s good - the point is to provide high enough to cover for NPAs, or even higher. (Also note that income is up 50%, PBT is up 50% and so on - so it’s not unusual to see a provisioning also go up at the same rate)

It’s useless to defend a bank’s numbers. They can invent what they want. HDFC doesn’t generate a 20% profit growth yoy every single quarter without some kind of change they have power to do. In the end, like you said, it’s about your trust in bank management. But I would like to debunk any mentions that seem incorrect in my opinion, even if it may not change anyone’s view on the stock or the bank.


I only have one thing to say. High growth in lending business shouldnt be looked at negative always even if others are not growing at that pace. Even HDFC bank grew 100%+ in initial years when sector underperformed. Its good to gain knowledge from books but finally price action makes opinions as in this case.

Most of the corporate are facing liquidity issue due to tough economic conditions and if you see the corporate exposures most of the banks have exposure to these troubled corporate even the so called good banks with superior underwriting skills.

Here is the list of stress account exposure to banks shared by virendra bansal.


Completely agreed on the expenses part. There’s no way to dice and arrange them neatly.

Also, I did mention that “Vision 2020” was created in 2015. But the “targets” were only assigned mid-way. And claiming to have achieved the targets just a year after deciding them feels a little odd to me. But that may just be my bias, hence the warning that the entire post was just an opinion, not an iron-clad case study.

If I still didn’t come across correctly to anyone, let me try to summarize:

  1. I think the bank’s goals are tall and spread across a range of landscapes. So I hold the opinion that some focus is in order.
  2. If the investor believes that the bank is going to achieve all the targets anyway, the question of how much shareholder value dilution is going to happen in the process also needs to be considered.
  3. If the shareholder is also ready to put up with the dilution, then I have nothing more to say.


Thanks for this. I had one difference when I saw this yesterday. In my knowledge RBL has a larger exposure than what is given here. I think this is ending FY19.

The companies which in this table to whom RBL has given loans to is what I have checked manually. I have gone through all their subsidiaries and related party companies as per latest report. Off-course I could have made manual errors or missed something but below are my findings.

Number of companies whose charges studied

As of today what is the status


This is just under double the number quoted in the table.

There will be more companies where RBL has lent to e.g. Eveready Ind which doesn’t figure in this table.

Aside from this I am a tad surprised that these outstanding numbers are in public domain but before the price collapse it appeared a screaming buy at <500 levels with ~100% confidence levels as per valuations and now we are finding reasons to say why ‘I told you so’.

Reminds me of Mark Twain’s quote - It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so

The kind of analysis @rupeshtatiya bhai has proactively done and shared on this was really good. He asked a good set of questions and we don’t have answers yet. This was done right at the peak of the price when most of us didn’t bother to dig around.


disc: invested but reduced position due to stop loss


@deevee Thank you for good analysis and matter of fact view on change of mood of the street and I am also very surprised on the change of discourse. It started much before results supposedly as rumors. That would mean many knew what kind of warning signals going to come.

With these stressed loans and provisions overall the situation is better than few other banks trading in similar P/B valuations. So what goes in such a strong reaction in market? Is it possibility of more cockroaches coming out in the open over the time?

What strategies you use to determine stop loss? Is it is fixed % from the top or do you use technicals to determine one or another way to protect from loss ensuring a percentage profit. Would like to know.

Disc: about 4% of PF, added some at 500 levels

On the “Vision 2020” part. The stock was listed in 2016, and the FIRST EVER presentation released had the quantification of the vision 2020. It was not invented later as per the accusation above. They did not achieve it a year later, they are still in the process of getting there (haven’t yet got there). I think saying that they put the figures in later is not correct, and unfairly accuses the management of what is considering wrong. I understand your post was an opinion, but I’m going to provide facts.

Here’s my opinion further:

  1. The banks goals ARE tall, but every bank in the country has to have tall and widespread. This is not about focus - it’s about the economies of scale in banking being achieved only through a widespread approach. People approach banks with financial problems - investments, credit and payments. You have to have solutions to offer and that’s what reduces your cost to income ratio in the long term.
  2. Dilution as I mentioned, is at equity levels. You have to look only at how many more shares they will issue. At 10% or 20% levels over the next six years is a given, considering capital requirements. This should help them get to some part of their goals if not all of them. If the contention is that they will need to dilute 100% and raise 20,000 cr. in equity (that’s the current market cap) then I don’t really have anything more to say.

RBL Bank expects to grow by up to 20% this fiscal: Rajeev Ahuja.

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He says mid range of 20%

Anurag Shah , Ahuja said the bank expects its profit growth for the fiscal to remain between mid-high and 20%.

Anyone know if RBL has exposure to cafe coffee Day? Seems some insiders know something about…

They had exposure in FY 17 as per AR but no exposure now. These loans are secured and provided against land.

Negative news spreads like fire and even more damaging if its an FNO stock.

All these below bank had exposure earlier but none fell as RBL bank. Its the shorters who are cashing in on negative sentiments and I dont blame them as its giving opportunity to add at lower levels.

standard chartered
oriental bank
axis bank
idfc bank
indusind bank
south indian
yes bank
tata finance
icic bank
HDFC bank
bajaj finance
dcb bank

Disc - Holding and added today


Don’t know about now but as per AR 2018 they had around Rs. 360 cr exposure.

Also as per AR 2018 they have exposure to Sical Logistics of approx. Rs. 100 cr as on March 2018.

Coffee day group acquired Sical logistics which they have kept as corporate guarantee for taking loan.

Here is a snapshot of the amounts Coffee Day Enterprises owes to RBL bank from coffee day enterprises 2018 AR. 4th column is as of March 2018 and 5th column is as of March 2017.Capture Capture1 Capture2 Capture3 Capture4 Capture5

Got this screenshot from mca webpage for coffee day.

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So from the 383 in AR 2018 owed to RBL bank, only 174 cr is left acc to MCA?

Disclosure: invested

Exposure to Cafe Coffee Day


RBL Bank On Exposure to CafeCoffeeDay