RBL Bank Stock Up on Board’s Nod for ₹6,500 Crore Fundraise

RBL Bank shares rose approximately 3% on June 28 after the bank's board approved a fund raise of up to ₹6,500 crore. However, as the market declined, RBL Bank's stock cooled off and was trading around 0.5% higher at ₹264.13 on the National Stock Exchange (NSE).

RBL Bank announced on Thursday that it will raise up to ₹6,500 crore ($779 million) through a combination of qualified institutional placement (QIP) of shares and debt sale. The bank plans to raise ₹3,500 crore through QIP and ₹3,000 crore through the issuance of debt securities via private placement, as stated in an exchange filing.

This will be RBL Bank's first share issue via institutional placement since 2021, a period marked by an abrupt management transition and increased scrutiny from the central bank. At that time, the central bank temporarily appointed a director to RBL Bank's board amid concerns about a significant amount of unsecured borrowing on its books.

The fundraising comes as RBL Bank aims for 20% growth in its loan book over the next two financial years, primarily driven by an increase in secured retail assets. However, the bank did not specify how it plans to deploy the proceeds from the latest capital raise.

QIP, or Qualified Institutional Placement, is a fundraising tool used by publicly traded companies in India to raise capital from domestic or foreign institutions. Introduced by the Securities and Exchange Board of India (SEBI), QIP allows companies to quickly and efficiently raise funds without the lengthy process associated with public offerings.

Only Qualified Institutional Buyers (QIBs) such as mutual funds, foreign institutional investors, banks, insurance companies, and pension funds are eligible to participate in a QIP.

Companies utilize QIPs to raise capital for various purposes, including expansion, debt repayment, working capital needs, and other corporate requirements. SEBI has established specific guidelines for QIPs to ensure transparency and protect investor interests.

RBL Bank's market capitalization has risen to over ₹16,000 crore. The stock has a one-year beta of 1.6, indicating high volatility. Technically, the Relative Strength Index (RSI) of RBL Bank is at 55.9, suggesting it is neither in the overbought nor the oversold territory. 

In fiscal 2024, RBL Bank reported a 20% growth in advances and a 22% increase in deposits. The lender's shares ended 2.1% higher ahead of the fundraising announcement.