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IndusInd Bank Expects Rs 2,000-Cr Capital Infusion From Promoters On Successful Rights Issue

The bank's shares on Wednesday touched an intra-day high of Rs 1,085 apiece before closing 2.46 per cent down to Rs 1,032.60 apiece on the BSE.

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Hinduja Group's IndusInd Bank is expected to get a capital boost from promoters by Thursday after a successful rights issue in which they have raised Rs 2,021.45 crore.

The rights issue was necessitated to infuse residual capital into the bank in lieu of conversion of warrants issued to them in 2019 worth over Rs 2,695 crore into equity.

In the just-concluded rights issue by one of the promoters, lnduslnd International Holdings Ltd (IIHL), the latter has paid a significant premium over the prevailing market price at Rs 1,709 apiece to redeem 75 per cent warrants.

The bank's shares on Wednesday touched an intra-day high of Rs 1,085 apiece before closing 2.46 per cent down to Rs 1,032.60 apiece on the BSE.

This also reaffirms the promoter group's unstinted support to the lender.

IIHL has completed its capital raise through its rights issue, which was oversubscribed.

'This reiterates the confidence of IIHL's global shareholders, spread across 34 countries, in the decision of IIHL and its subsidiary, IndusInd Ltd, to redeem the balance of 75 per cent of the warrants at the price of Rs 1,709 per share (a huge premium over the current market price of Rs 1,059), aggregating to Rs 2,021.45 crore,' IIHL said in late night release on Tuesday.

IIHL raised capital at an overwhelming premium of 1,400 per cent towards the subscription of this rights issue, it said The private sector lender had issued convertible warrants to promoters -- IndusInd International Holdings ltd (IIHL) and its subsidiary IndusInd Ltd (IL) -- on July 6, 2019, for a total amount of Rs 2,695.26 crore against 1,57,70,985 warrants.

While they paid Rs 673.82 crore towards 25 per cent of the warrant subscription at a price of Rs 1,709 per piece, the rest of Rs 2,021.44 crore was to be paid on January 5, 2021, for conversion of remaining 75 per cent warrants into equity shares.

However, they got one-month extension from market regulator Sebi to infuse the residual capital into the bank because of the pandemic-induced economic stress.

The bank expects a capital infusion of over Rs 2,000 crore from the promoter by February 18, Chief Executive Officer Sumant Kathpalia had said last month.

He had also said the bank would not need any additional infusion for at least six more months.

IIHL will also monetise some of its other mature and non-core investments for the pending capital infusion in the bank.

'The funds from this divestment and the rights issue will be remitted on or before the February 18, 2021, as permitted by Sebi.

'This would lead to IIHL shoring up additional equity of 1.7 per cent in lnduslnd Bank thereby bringing promoter equity to 15 per cent,' IIHL said adding that it intends to increase its stake in bank to 26 per cent.

Last year, the bank had to do fire-fighting several times, especially after the Yes Bank debacle in March 2020, as rumours kept floating in the market about the bank's financial position time and again.

It also had to issue statements that all was well with the bank and the promoters had full confidence in it.

The lender's deposit base had declined to Rs 2.02 lakh crore in the March 2020 quarter, against Rs 2.16 lakh crore in the preceding quarter.

Its return on assets (RoA) fell to 0.42 per cent by the end of the fourth quarter of 2019-20, from 1.82 per cent in its previous quarter. Likewise, the return on equity (RoE) also plunged to 3.69 per cent from 15.62 per cent.

However, since the fall in March 2020, the RoA has improved consistently to 1.05 per cent as on December 31, 2020. And, the RoE has gained pace to 8.35 per cent.

The bank's deposits have also improved to Rs 2.39 lakh crore by the end of Q3FY21, from Rs 2.02 lakh crore at end of March 2020.

Also, the bank strengthened its balance sheet by improving the provision coverage ratio to 87 per cent at the end of December 2020, from 53 per cent a year ago.

The Mumbai-headquartered lender commenced its operations in 1994.

Over-a-century-old Hinduja Group, which started business from merchant banking and trade way back in 1919, has now diversified into several businesses including automotive, IT, infrastructure, power, real estate, and oil and speciality chemicals.

The group manages its business under the chairmanship of Srichand Hinduja and supported by his brothers, Gopichand, Prakash and Ashok Hinduja.

(PTI)