InvestorQ : I understand there has been some employee selling in the shares of RBL Bank leading to the fall in share price. Is that correct and what does it mean for the stock?
Dilmini Mercia made post

I understand there has been some employee selling in the shares of RBL Bank leading to the fall in share price. Is that correct and what does it mean for the stock?

Answer
user profile image
Dhwani Mehta answered.
1 year ago


The sharp fall in the price of RBL Bank was more an outcome of their exposure to the Café Coffee Day group. In fact, the group has an exposure to the coffee, logistics and plantations business of the CCD group. What apparently transpired is that the employees had been allotted ESOPs and they had borrowed from the banks to fund the ESOPs. However, since the prices of the stock crashed after the death of the CCD founder, most of the employees could not pay the margin required for the ESOP funding. As a result the financers were forced to sell the shares in the market leading to an aggressive and sharp fall in the price of RBL Bank.

The bank has confirmed that the shares sold by the employees were entirely in line with the trading policy of the company, in which case there should not be a problem. It could be a one-time issue of financing of ESOPs going wrong. However, you may have to wait for a clearer picture of the stressed assets in the books of RBL Bank. If CCD is just a one-off case then it is OK. However, if there are more such cases then you will have to be careful. I don’t think you should jump in and buy the stock at this point of time.