M&M shares fall 7% after RBL Bank investment

Shares of Mahindra & Mahindra (M&M) dropped as much as 7% in intraday trade on Thursday after the automaker acquired a 3.53% stake in RBL Bank for ₹417 crore.

"We may consider further investment subject to pricing, regulatory approvals and required procedures. However, in no circumstance will it exceed 9.9%," the Anand Mahindra-led group says in a stock exchange filing.

Reacting to the stake purchase in the Mumbai-based lender, shares of Mahindra & Mahindra opened at ₹1,499 against their previous closing price of ₹1,544.85 on the National Stock Exchange. The stock hit a low of ₹1,438.35 apiece in intraday trade, taking the company's market cap to ₹1.80 lakh crore.

Meanwhile, shares of private lender RBL Bank too fell 1% after hitting a 52-week high on Wednesday. The stock had risen 5% in intraday trade yesterday amid reports that the Mahindra group is looking to acquire a strategic stake in the bank.

RBL Bank has turned multi-bagger over the past year, with its share price surging 157% from its 52-week low of ₹91.10 on July 29, 2022. On a year-to-date basis, the counter has jumped 30%. It has gained 57% in the past six months.

"We being a listed company, for trading in the shares of the Bank there is no pre-approval required from the Bank except for the fact that as per the Master Direction – Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023, any shareholder who wishes to acquire 5% or more of the shareholding of the Bank is required to make an application to Reserve Bank of India to seek their prior approval for such acquisition. No such application has been received by us till date," the lender says in its stock exchange filing.

RBL Bank's net profit soared 43% year-on-year to ₹288 crore for the first quarter of FY24 as against ₹201 crore in Q1 FY23.

Net interest income grew 21% year-on-year and 3% quarter-on-quarter to ₹1,246 crore. Net interest margin (NIM) was 4.84% in Q1 FY24 compared with 4.36% for Q1 FY23. Net Advances book grew 21% year-on-year and 4% sequentially to ₹73,087 crore. Retail advances book grew 34% year-on-year and 8% sequentially to ₹40,866 crore.

Gross non-performing assets (NPA) ratio improved to 3.22% versus 3.37% as on March 31, 2023 and 4.08% as on June 30, 2022, an improvement of 87 basis points in a year.

Net NPA ratio improved to 1% in Q1 as against 1.1% as of March 31, 2023 and 1.16% as on June 30, 2022, an improvement of 16 basis points in a year.

"We have started FY24 with strong operating performance on all parameters. The advances growth was healthy with strong disbursals continuing in retail segment. We have further improved on our granular deposits, in line with our laid out strategy. Our revenue has grown faster than operating expenses driven by optimisation of few cost lines. Owing to this, the Bank saw strong growth in Operating Profits and PAT," says R Subramaniakumar, managing director and CEO, RBL Bank.

"Our asset quality parameters have remained stable. Our healthy capital position provides us with good runway for growth," he adds.