Equity mutual funds adopt 'wait and watch' policy on RBL Bank

94 equity and hybrid schemes have invested in stocks of RBL Bank worth Rs 1,996.34 crore as of end-Nov

Asset management companies are in no hurry to take immediate decisions on their investments in RBL Bank. Equity and hybrid mutual funds (MFs) have investments of around Rs 2,000 crore in RBL Bank. Industry officials are confident that there are no financial irregularities as yet.

On Monday, the stock of RBL Bank ended at Rs 140.9, down Rs 31.6, or 18.32 per cent, on the BSE. The stock got spooked after Vishwavir Ahuja, its managing director (MD) and chief executive officer (CEO), went on leave and the Reserve Bank of India (RBI) appointed an executive to its board.

“Today, there is too much noise and volatility in the stock. We would wait and watch for the third-quarter results to make any changes to the portfolio. Once we get more clarity on the results, we can take an informed decision on the stock,” said a fund manager.

The data from Value Research shows there are around 94 equity and hybrid schemes which have invested in the stocks of RBL Bank worth Rs 1,996.34 crore as on end-November. Assuming the MFs’ holdings haven’t changed much since end-November, Monday’s fall in the share price means a fall of Rs 365 crore in the combined value of RBL Bank holdings of MFs.

At the end of November, HDFC Mid-Cap Opportunities had an exposure of Rs 239.61 crore, followed by Nippon India Multicap Fund and Kotak Flexicap Fund. There are few arbitrage funds and exchange-traded funds, which have investments in RBL Bank, reveals the data from Value Research.

“Right now it doesn’t look like any financial irregularity. I believe the ongoing crisis is only due to a leadership issue and if Rajeev Ahuja continues to helm the bank, I don’t think there will be more damage. In fact, my sense is that MFs will be buyers of this stock at lower levels,” said a CEO of a leading fund house.

On Sunday, the board of RBL Bank appointed Ahuja (existing executive director of the bank) as interim MD and CEO of the bank, subject to regulatory and other approvals.

Fund managers also say that they would prefer Ahuja to continue to lead the bank as there will be continuity in business.

Shriram Subramanian, founder and MD of proxy advisory firm, InGovern Research Services, says the RBI could have been more forthcoming on the reason why it appointed its own man Yogesh Dayal to the board of RBL Bank. 

“The lack of clarity on this spooked the markets and depositors. Regarding the minority shareholders, they have to believe whatever the management and the RBI have said, because right now asset quality numbers put out by the bank don’t seem to be in doubt,” stated Subramanian.