India’s RBL Bank sees an opportunity to start a wealth management business after Emirates NBD (ENBD) buys 60 percent stake for $3 billion, RBL Chief Executive R Subramaniakumar said on Sunday.
The Middle Eastern bank will invest $3.05 billion in the private lender through a preferential issue of shares in the deal announced on Saturday, the largest cross-border acquisition in the Indian financial sector.
The deal is the latest in a series of cross-border deals in India this year as India seeks to attract foreign investment and strengthen the country’s midsize banks. Months earlier Japan’s Sumitomo Mitsui Banking Corp moved to buy up to 25 percent of Yes Bank.
“We aspire to become a large bank post-investment from Emirates NBD,” Subramaniakumar told a press conference. He said RBL’s management will remain through the transition period.
RBL Bank hopes to get the first instalment of funding in five to seven months, said Jaydeep Iyer, the bank’s chief strategy officer. He said the merger will be effective from April and RBL will be a listed subsidiary of ENBD.
India allows 74 percent foreign investment in private banks but limits shareholdings of any single foreign institution to 15 percent unless the Reserve Bank of India grants exemption. The RBI has informally communicated its backing for the ENBD deal, sources told Reuters last week.
ENBD is expected to launch an open offer for additional shares from retail shareholders ahead of a preferential issue, Iyer said. After the acquisition, RBL Bank’s capital adequacy ratio will be 40 percent, he said. In the Middle East’s least electrified country, solar energy is now bringing a ray of hope.
