IndusInd Bank Plans Stake Sales To Bolster Its Balance Sheet

Indian private lender, IndusInd Bank will sell Rs 3,288 crores worth of stakes to institutional investors as a measure to raise its capital funds base amid rising uncertainties caused by the pandemic outbreak. IndusInd is walking the same line that some of the other premier banks have already opted. Big wigs like HDFC Bank Ltd., Axis Bank, and ICICI Bank has already raised funds from the market to shore up a buffer as the economic crisis is intensifying.

IndusInd is planning to sell stakes to selected institutional buyers. The promoter’s group, Hinduja Group and IndusInd International will also invest during the sell and together will infuse Rs 792 crores to preserve their 15 percent stake in the bank. Other investors who will invest are Route One, ICICI Prudential Life Insurance, Tata Investment Corp, and International insurance firm, AIA. US-based hedge fund Route One has recently received a green signal from RBI to raise their stakes in the bank to 10 percent and will invest Rs 935 crores; followed by ICICI Prudential Life Insurance for Rs 850 crores. Tata Investment Corp and AIA will invest Rs 300 crores and Rs 410 crores respectively.

IndusInd CEO, Sumant Kathpalia said that IndusInd bank share sale is a part of the bank’s strategic policy and will help in bolstering the bank’s balance sheet to navigate successfully through the uncertainties arising from COVID-19 condition. He further added that the bank is currently comfortably placed with sufficient liquidity and a buffer of Rs 30,000 crore. The raised capital will help it maintain position when the economy bounces back after the lockdown.

As the chances of economic crisis intensifying, banks are building up a war-chest to sail through a hard time. The central bank, RBI has already warned banks on rising NPA in the months following moratorium. Loan recovery has taken a hit due to reduced repayment capacity of the borrowers. IndusInd is trying to build a comfortable cushion that will help it battle business slowdown.  The bank said that they would use the capital to invest in liabilities, expansion, product offering, technology and infrastructure, and improving overall customer experience.

IndusInd shares rallied 4 percent in the BSE while the SENSEX gained 1.47 percent after the announcement. The bank’s share closed at Rs 527 apiece on Tuesday. The decision regarding preferential share sale is currently pending for shareholder’s approval which will be taken in the extraordinary general meeting called on August 25. After the issue, the bank’s capital adequacy ratio, which is currently standing at 15.3 percent will rise to 16.5 percent. IndusInd Bank share sale price is decided at Rs 524 apiece – a slightly discounted rate from Tuesday’s closing price.  However, the bank is yet to confirm a date of the issue.