IndusInd Bank promoters to buy more of its shares in secondary market

Private sector lender IndusInd Bank’s promoters – IndusInd International Holdings Ltd and IndusInd Ltd – have informed the bank management that they will buy additional stake in the bank from the secondary market.

In a letter to the managing director and chief executive officer of the bank, the promoters have said, they will buy additional shares from open market in India, within the overall regulatory prescribed promoter equity holding cap.

Currently, the promoters hold 14.68 per cent of the paid up share capital of IndusInd Bank. As per the banking regulations of the Reserve Bank of India (RBI), the promoters can buy 0.32 per cent additional stake in the bank as of now.

According to RBI norms, a bank needs to bring down its promoter shareholding to 40 per cent in the first three years after starting operations. Thereafter, the bank needs to bring down its promoter shareholding to 20 per cent in 10 years and 15 per cent in 15 years. For IndusInd Bank, the promoter equity holding in the bank, as per the RBI norms, is capped at 15 per cent.

However, recently, the bank promoters had expressed their desire to increase their stake in the bank to 26 per cent and have sought RBI’s approval on the same. But, the RBI has not given its go ahead on the proposal of the bank promoters’ as of now. The bank management during its Q4 results had informed that they have not received any communication from the RBI on the proposal. This comes after promoters of Kotak Mahindra Bank were permitted by the RBI to hold upto 26 per cent stake in the bank.
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The bank’s stock has been under pressure for some time now. The banks’ stock is down 71 per cent in the last one year. Post the announcement, the banks’ shares gained more than 6 per cent from previous days’ close and is trading at Rs 449.

In the recently declared Q4 results, the bank reported a capital adequacy ratio of 15.04 per cent compared to 14.16 per cent a year ago. Tier 1 CAR was at 14.57 per cent as of March 31, 2020, compared to 13.70 per cent as of March 31, 2019.

The bank’s pre-tax profit declined 22 per cent year-on-year (YoY) and 77 per cent quarter-on-quarter (QoQ) to Rs 395.9 crore. Despite lower tax expenses restricting the fall in net profit to 16 per cent YoY (Rs 301.8 crore), profit fell significantly short of the analyst estimates of Rs 412 crore.

The bank’s gross non-performing assets (NPAs) as a percentage of loan book stood at 2.45 per cent as of March 2020, an increase of 27 basis point sequentially. Write-offs of Rs 1,490 crore confined the overall gross NPA pressure in Q4. Net NPA stood at 0.91 per cent, down 30 basis points from 1.21 per cent in Q4FY19.

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