Emirates NBD proposes to make an open offer for RBL Bank’s stake on December 12

Emirates NBD Bank (PJSC) has proposed to make an open offer of Rs 280 per share to acquire 26% stake in RBL Bank, the private bank informed exchanges. Shareholders can tender shares from December 12 to 26, subject to approval by Sebi. The total size of the open offer has been pegged at Rs 11,636 crores, assuming the offer is accepted in full. Emirates NBD has agreed to invest $3 billion (Rs 26,850 crore) to acquire a majority stake in RBL Bank, marking the largest acquisition of an Indian bank by a foreign financial institution and the largest inflow of foreign direct investment into the Indian banking sector.

The deal involves an open offer to purchase a 26 percent stake, followed by a preferential allotment taking Emirates NBD’s stake in RBL Bank to 60%. The investors are not expecting many shares to be offered in the open offer as it comes at a huge discount of Rs 280 to RBL Bank’s current market price of Rs 324.

“Depending on what comes in the open offer, there is a guideline in SEBI that talks about the fact that we will remain a listed bank, so therefore there is a minimum public shareholding of 25%,” Jaideep Iyer, Head – Strategy, RBL Bank said on October 19. But in theory, primary issuance could decline if there is a large open bid, which we really don’t expect.”

Had recently reported that RBL Bank would approach the Center to increase the Foreign Direct Investment (FDI) limit from 49% to 74%. A higher overseas ownership limit at RBL is needed to process the takeover of the local lender by Emirates NBD Bank.

While the total FDI limit allowed by law in private sector banks is up to 74%, foreign investment up to 49% is allowed through the automatic route. Any investment above this threshold requires prior government approval. The transaction will provide RBL Bank with significant growth capital to expand its corporate lending portfolio and accelerate its retail and microfinance activities. The partnership is also expected to strengthen RBL’s digital payments ecosystem, broaden its distribution network and create opportunities in the India-Middle East trade corridor.