RBL Bank cuts IPO size, seeks $1.25 bn valuation
Photo Credit: Shah Junaid/VCCircle

RBL Bank Ltd has cut the size of its initial public offering after it raised capital from a bunch of investors in a pre-IPO placement late last year and as its selling shareholders trimmed the offer for sale.

The private-sector lender, earlier known as Ratnakar Bank Ltd, has fixed Rs 224-225 a share as the price band for the IPO that begins on August 19. This will translate into an issue worth Rs 1,213 crore ($182 million) at the upper end of the price band and value the lender around $1.25 billion.

The lender has cut the size of both the fresh issue and the number of shares on offer for sale in its red herring prospectus.

Originally, it had sought to raise up to Rs 1,100 crore ($162 million then) through a fresh issue of shares and an offer for sale of 17.56 million shares by some equity holders.

It is now looking to raise Rs 832.5 crore ($125 million) through the fresh issue and an offer for sale of up to 16.9 million shares.

One of its private equity investors, Beacon India Private Equity Fund, is selling all its shares. The company, which counts several other PE shareholders, will also see some others such as Gaja Capital and Capvent part-exit in the IPO. The PE exit plan in the final proposal remains the same.

The bank likely cut the size of the fresh issue after it raised Rs 488 crore ($74 million) last December through a pre-IPO share placement to investors including the UK's development finance institution CDC Group, the Asian Development Bank, DVI Funds and an entity representing Saudi Arabia-based group Rashed Al Rashed (RAR group or the Rashed Abdul Rahman Al Rashed & Sons Group).

Speed breakers to IPO

RBL Bank had received approval from the Securities and Exchange Board of India (SEBI) on 27 July, nearly a year after it applied.

The issue got delayed as the capital markets regulator was examining some past violations by RBL Bank. In June, SEBI agreed to settle the outstanding case against RBL Bank for violation of disclosure norms related to issue of shares worth over Rs 600 crore to select investors.

SEBI had asked the bank to resolve the issue of past violations of the Companies Act, wherein it had issued securities to a higher number of subscribers than permitted under the Act.

The bank had sold shares under a rights issue and preferential allotment to over 49 investors, making it a public issue technically, in violation of the norms.

Rare bank IPO

RBL will become the first private-sector bank to float an IPO in a decade. The last prominent private-sector bank to float an IPO was YES Bank in 2005. In 2010, state-run Punjab & Sind Bank went public.

Interestingly, RBL was one of two private-sector banks eyeing a public float. Another PE-backed private lender, Catholic Syrian Bank, had also got clearance from SEBI for an IPO. But this approval expired in June as it decided not to go ahead with the public issue in the wake of volatile equity markets.

Indian benchmark stock indices have bounced back and are now just around 5% short of the all-time highs clocked last year.

Kotak Mahindra Capital, Axis Capital, Citigroup, Morgan Stanley, HDFC Bank, ICICI Securities, IDFC Securities, IIFL Holdings and SBI Capital Markets are managing the RBL issue.

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