RBL Bank eyes large lender status on back of Emirates NBD's $3 bn offer

The $3 billion investment gives RBL Bank access to global expertise, fresh capital, and expansion opportunities in corporate, retail, and wealth banking segments

The $3 billion investment by UAE-based Emirates NBD PJSC for a 60 per cent stake will help RBL Bank expand in India and transform itself from a mid-sized lender into one of the country’s larger banks. The bank plans to strengthen its corporate lending capabilities, enter wealth management business, accelerate retail loan growth, and leverage digital technology to tap the West Asia market, the management said on Sunday.

 

“We are now a mid-sized bank, and our aspiration is to move into the league of large banks. This provides us an enormous opportunity to move into that,” said R Subramaniakumar, managing director and chief executive officer of RBL Bank. He added that the bank’s distribution centres would now multiply, leading to greater mobilisation of deposits. 

 

Subramaniakumar said the bank’s existing businesses would get a boost as it expands into new geographies. The bank is also expected to secure a fair share of the digital payments business along the West Asia-India corridor as a result of the investment. 

The deal offers RBL Bank an opportunity to strengthen its corporate banking franchise and underwrite larger loans to highly-rated corporates. Emirates NBD already has a strong wholesale banking business in India, creating potential synergies, and RBL Bank can now explore opportunities in debt syndication as well.

 

Following the completion of the deal, RBL Bank, currently classified as a domestic private-sector lender, will become a listed subsidiary of a foreign bank, and its capital adequacy ratio will be 40 per cent.

 

Emirates NBD’s investment is the largest foreign investment in India’s private banking sector. Earlier this year, Japan’s SMBC acquired a 24 per cent stake in Yes Bank, while Abu Dhabi’s International Holding Co PJSC bought 42 per cent of Sammaan Capital for nearly $1 billion.

 

As a promoter, Emirates NBD will not be required to reduce its stake below 51 per cent, unlike domestic promoters who are mandated to bring it down to 26 per cent over time. However, its voting rights will remain capped at 26 per cent, even though it will have the right to nominate a substantial number of members to the reconstituted board. 

 

In the new board structure, 50 per cent of the members will be independent directors, while the remaining will comprise executive directors and non-executive directors representing Emirates NBD.

 

According to Subramaniakumar, Emirates NBD will maintain a minimum 51 per cent stake at all times and ensure that its shareholding does not exceed the 74 per cent foreign investment limit. He added there are no plans for management changes, but the reconstituted board may take appropriate decisions over time as the partnership evolves.  “It is going to be a board-driven bank,” he said.

 

The bank management explained that the deal has been structured so that the open offer will be conducted first. If the combined stake from the 60 per cent preferential issue and the open offer exceeds the minimum public shareholding norms prescribed by Sebi, an appropriate scaling down of both will take place. In that case, primary issue size may be reduced, though the open offer is not expected to be large.

 

Currently, India allows up to 74 per cent foreign investment in private banks, while Sebi mandates a minimum 25 per cent public shareholding for listed companies.

 

“With a 60 per cent primary offer, a 26 per cent open offer on the expanded capital would technically be required, taking the total to 86 per cent, which is well beyond the permissible limits under both foreign investment and public shareholding norms,” said Jaydeep Iyer, chief strategy officer, RBL Bank. He added that the transaction is expected to take at least five to eight months to fructify, subject to necessary regulatory approvals.

 

The transaction will also involve the amalgamation of Emirates NBD’s India branches with RBL Bank. Emirates NBD operates three branches in India — Mumbai, Delhi, and Chennai. Following the merger, Emirates NBD will be allotted additional shares in RBL Bank at the same price of ₹280 per share. 

Big deals in 2025

• SMBC bought 20% in Yes Bank for over $1.6 billion
• International Holding Company to invest $1 billion for over 42% stake in Sammaan Capital
• Warburg Pincus and Abu Dhabi Investment Authority to invest $877 million in IDFC FIRST Bank