Thursday, 9 October 2014

Ratnakar hires four banks for Rs1,200 crore IPO



Ratnakar Bank Ltd (RBL) has appointed four investment banks for its Rs.1,200 crore initial public offer (IPO), which is expected to hit the market before March 2015, three people close to the development said. The bank is expected to file its documents with the market regulator as early as October. The bank has mandated Kotak Mahindra Capital Co. Ltd, Citigroup Inc., Standard Chartered Plc and Morgan Stanley to handle the issue. Mint had reported on 1 July that the private sector lender plans to dilute about 10% stake through the IPO, which values the bank at Rs.12,000 crore. “Things have got better macroeconomically. Confidence is back in the market, interest rates have peaked and the rupee is stable. The macroeconomic environment is in favour of banks and a lot of investors are interested to buy stake in the bank,” one of the persons mentioned above said. An RBL spokesperson did not respond to an email seeking comment. Though RBL has no immediate requirement for fresh capital, the IPO would help the bank comply with the Reserve Bank of India (RBI) guidelines issued last year that directed all banks to list within three years of starting business. Over the last three years, global and local private equity and development funds have invested over Rs.1,400 crore in the bank in three tranches. Housing Development Finance Corp. Ltd, Norwest Venture Partners, Samara Capital, Beacon Capital, Faering Capital, TVS Shriram, Cartica Capital, Ascent Capital, Aditya Birla Private Equity, IDFC’s Spice Fund and ICICI’s Emerging India Fund are among its shareholders. Most investors, however, may continue to stay invested, the person quoted above said. “It is unlikely that any of the existing investors will sell their investments in the bank because none of them have stayed invested for more than three-and-a-half years. Some of the bank’s shareholders are development finance institutions, which typically hold their investments for many years,” he said. As recently as 10 April, RBL raised Rs.328 crore by selling fresh shares to UK government-owned development institution CDC Group Plc and Asia Capital and Advisors Pte Ltd along with existing shareholders International Finance Corp. and Gaja Capital. Though RBL is an old private sector bank established in 1943, it has accelerated its growth under a new management led by managing director and chief executive officer Vishwavir Ahuja since 2010. In the last three years, the bank has shed its regional image, opened branches and attracted new investors. The share sale, if it materialises, will make RBL the 41st publicly traded bank in India. The IPO comes at a time when secondary markets are buoyant and interest in primary markets is starting to pick up. Vinod Wadhwani, director at Ambit Corporate Finance Pte Ltd, expects a robust investor response to the IPO. “Given that most of the public sector banks are reeling under the huge pressure of non-performing loans, investor interest in public sector banks is limited. There is a dearth of new and quality paper supply in the private sector as well. Private sector banks such as Ratnakar Bank, which has a competitive management team in place, is expected to continue its growth trajectory. Hence, the investor response to the IPO is expected to be robust,” Wadhwani said. Since mid-May, after the election results were announced, the Sensex has risen about 12.79%. Bank stocks have also been gaining in anticipation of better economic prospects. Since the beginning of 2014, the BSE’s Bankex has gained 42.53% while the benchmark Sensex has gained 28.51%. In an interview with Mint in June, Rajeev Ahuja, head of strategy at the bank, had said that no single investor holds more than 5% in RBL. An IPO will hence mean a further reduction in stakes of existing investors. Besides, it will also give liquidity to employees for their stock options and probably attract more large investors who would want to buy into a listed bank. As on 31 March, the bank had a loan book of Rs.9,835 crore, according to RBL’s website. In fiscal year 2014, it added 51 branches and a similar number will be added in the current fiscal year, Ahuja had said. As on March 2014, RBL had 185 branches and 350 ATMs with more than 500,000 clients. Overall, the bank is targeting growth of 40-50% in advances and deposits over the next couple of years, Ahuja said. For the year ended March 2014 the bank’s net advances grew 54% while deposits rose 39%.


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