27 Dec , 2021 By : Kanchan Joshi
Shares of RBL Bank plunged as much as 23%, hitting a day's low of Rs133 apiece on the BSE in Monday's early deals after a slew of concerning developments over the weekend. RBL Bank's Vishawvir Ahuja has stepped down as MD & CEO, and the bank has appointed Rajeev Ahuja as as the interim Managing Director and Chief Executive Officer.
In a surprising turn of events, the Reserve Bank of India (RBI) has also appointed its Chief General Manager Yogesh K Dayal as an additional director on the board of RBL Bank.
Brokerage house Emkay believes, in order to comfort investors, more explanation will be required from management to justify the sudden exit of Vishwavir Ahuja nearly six months before his term ends and the RBI’s intervention (typically seen in weak banks like Ujjivan, Dhanlaxmi, LVB, J&K Bank).
"That said, we draw some comfort from the appointment of Rajeev Ahuja as interim MD & CEO, healthy liquidity buffers/capital ratios and management’s strategic intent to change the portfolio mix toward secured assets. However, near/medium-term business/asset quality dislocation is inevitable," the brokerage added. It has retained Hold rating with a target price Rs165.
Rajeev Ahuja, the bank's newly-appointed MD and CEO, told reporters that the bank does not anticipate major capital needs in the short term, countering fears of problems in management. He added that the December quarter is expected to be even better, and in the March quarter, the bank will hopefully return to its pre-pandemic performance.
A day after its top executive stepped down, RBL bank clarified that these developments are not in any manner a reflection on the fundamentals of the Bank. It further added that these developments are not on account of any concern on advances, asset quality and deposits level of the Bank and that it has the full support of the RBI.
In recent months, reports suggested that some employees of RBL bank sought the finance ministry's support to oversee operations as they believed regulatory frameworks were being ignored by the bank's top management.
Another brokerage ICICI Securities said “repercussion of this move on various stakeholders (including depositors, employees, etc) and consequent derailment of confidence and disruption would be key monitorable going forward. With anticipated elevated stress and muted growth, we were of the view that modest RoA/RoE profile will cap valuations."
The brokerage has downgraded the stock to Sell with revised target price of Rs130 (earlier: Rs181) as it believes this incremental adverse development will further weigh interim pressure and can drag valuations.
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