Emkay Global Financial Services has reaffirmed its BUY recommendation on RBL Bank, raising the target price by 7% to Rs 375 from Rs 350, representing a 24.6% upside from the current market price of Rs 301. The research house anticipates transformative growth following Emirates NBD's proposed majority stake acquisition, which awaits regulatory clearances by mid-4QFY26. While near-term margin pressures from recent rate cuts may constrain FY26E earnings, the capital infusion promises to catapult RBL Bank into a different orbit altogether, with networth surging to approximately Rs 450 billion and CET-1 ratio reaching 39%, enabling aggressive expansion across mortgages, corporates, and fee-generating businesses. The bank's strategic repositioning toward lower-cost funding, improved credit ratings, and access to NRI fund flows positions it for robust Return on Assets expansion of 20-40 basis points over FY27-28E.​

Emirates NBD Acquisition: The Game-Changing Catalyst

The proposed strategic investment by Emirates NBD to acquire a minimum 51% majority stake in RBL Bank represents the cornerstone of this bullish thesis. Management, led by MD & CEO R Subramaniakumar, confirmed that regulatory approvals from RBI, DPIIT, CCEA, CCI, BSE, and NSE are anticipated by mid-4QFY26, following which ENBD will launch an open offer at Rs 280 per share accompanied by preference capital infusion. This transaction fundamentally recalibrates RBL Bank's competitive positioning, with networth potentially expanding from Rs 160 billion to approximately Rs 450 billion, placing it alongside peers like IDFC First Bank and Yes Bank.​

The deal's transformative potential extends beyond mere capital infusion. The enhanced balance sheet opens pathways for both organic and inorganic growth opportunities, enabling RBL Bank to strategically pivot its loan portfolio toward higher-quality, lower-risk segments including mortgages and corporate lending. Additionally, the substantially enlarged capital pool positions the bank to capitalize on lucrative fee opportunities in trade and transaction banking, segments where scale confers meaningful competitive advantages.​

Capital Adequacy and Valuation Metrics

The revised target price of Rs 375 reflects a valuation of 1.2x December 2027E Adjusted Book Value, a methodology that incorporates forward-looking earnings power. Critically, this valuation framework has not yet incorporated the business acceleration or Return on Assets surge likely to materialize post-deal completion, suggesting meaningful upside optionality beyond the stated target.​

Near-Term Headwinds: Margin Compression and Asset Quality

Despite the compelling long-term narrative, RBL Bank confronts immediate operational challenges that merit investor attention. The recent rate cut, coupled with potential additional reductions in 4Q, exerts downward pressure on Net Interest Margins, which have compressed from 5.5% in 1QFY24 to 4.5% in 2QFY26. This margin erosion will likely delay the achievement of a 1% quarterly Return on Assets run-rate until post-4QFY26, tempering near-term profitability expectations.​

Furthermore, asset quality metrics reveal persistent stress. The realignment of card business collections from BAF to RBL Bank is progressing slower than anticipated, potentially keeping slippages elevated through the near term at 3.7% in 2QFY26, though management expects Customer-Induced Finance growth to turn positive from 1QFY27. Gross Non-Performing Assets stood at 2.6% with a robust Provision Coverage Ratio of 89%, indicating conservative provisioning practices that provide a buffer against credit deterioration.​

Financial Performance Trajectory

Emkay's revised estimates reflect trimmed FY26E earnings due to margin pressures, while FY27-28E projections have been elevated by 8% to account for superior growth potential post-ENBD deal. Net Interest Income is projected to decline 2.5% in FY26E before rebounding with 22.2% growth in FY27E and 28.3% in FY28E, demonstrating the inflection point management anticipates following regulatory approvals.​

Strategic Portfolio Repositioning

RBL Bank's current loan composition demonstrates diversification across retail (34% secured retail, 17% credit cards, 3% personal loans), corporate (27%), commercial (13%), and microfinance (6%) segments. The Emirates NBD partnership provides strategic access to corporate franchise capabilities, where ENBD maintains 46% corporate exposure complemented by a retail book heavily weighted toward mortgages.​

Management articulated intentions to leverage improved cost of funds—derived from higher zero-cost equity funding, enhanced debt ratings, and access to Non-Resident Indian fund flows—to shift loan mix toward mortgages and corporates. This strategic reorientation promises better Return on Assets and Return on Risk-Weighted Assets metrics, addressing longstanding profitability constraints. The bank logged strong credit growth recovery in 2QFY26, with corporate and commercial segments expanding 34% and 32% year-over-year respectively.​

Investment Thesis and Key Levels

Key Investment Levels:

Current Market Price: Rs 301

Target Price (12-month): Rs 375

Stop Loss: Rs 260 (approximately 15% downside threshold)

52-Week High: Rs 332

52-Week Low: Rs 146

Valuation Multiples:

FY26E P/E: 18.8x

FY27E P/E: 10.8x

FY28E P/E: 6.6x

FY26E P/ABV: 1.1x

The investment case rests on three foundational pillars. First, the Emirates NBD transaction delivers unparalleled capital strength, creating optionality for aggressive balance sheet expansion and inorganic acquisitions. Second, structural improvements in liability costs through improved ratings, NRI access, and equity funding enable margin expansion beyond cyclical rate pressures. Third, management's demonstrated credit growth momentum in 2QFY26 validates underlying business resilience despite near-term macro headwinds.​

Emkay maintains that patient investors willing to weather near-term margin volatility stand to benefit substantially as the ENBD deal crystallizes and management executes its strategic transformation agenda. The 24.6% upside to target price, combined with accelerating EPS growth trajectory (16.0 in FY26E to 45.5 in FY28E), positions RBL Bank as a compelling multi-year compounder within India's evolving banking landscape.