IndusInd Bank on Wednesday announced a capital raise of Rs 30,000 crore and realignment of board to include two members from the promoters—the Hinduja Group. This comes roughly four months after the bank came under the Reserve Bank of India (RBI) glare for unreported forex derivatives losses of around Rs 2,000 crore. The Securities and Exchange Board of India (Sebi) had also raised the issue of insider trading by its former CEO, deputy CEO and three others.
Fundsraise
The Rs 30,000-crore fundraise will include Rs 20,000 crore via debt securities through private placement in Indian or foreign currencies, and an additional Rs 10,000 crore in equity capital via instruments like American Depository Receipts (ADRs), Global Depository Receipts (GDRs), or qualified institutional placements (QIP), the bank said in an exchange notification.
The fundraising plans are subject to shareholder and regulatory approvals. The annual general meeting of the bank is on scheduled on August 29, while it will report its first-quarter results on July 28. The governance realignment with the promoters — IndusInd International Holdings and IndusInd Limited —will have two non-executive, non-independent directors.
RBI’ approval
This proposal, following the change in amendments to its Article of Association, has received an approval from the RBI, the bank said. Currently, Sudip Basu and Pradeep Udhas are part of the IndusInd board. Both hold board positions in other Hinduja group companies. The bank also has in-principle approval to raise its stake to 26% from the apex bank. At Wednesday’s closing price of Rs 851.30, promoters will have to invest Rs 10,000 crore (from the expanded equity base of 117.5 million shares) to raise its stake to 26% from the current 15.08%.
After the bank’s problems mounted, Ashok Hinduja, chairman of promoter entity IIHL, had said the promoters were ready to inject capital, if required. However, with the bank’s capital adequacy at comfortable levels, he said there was no immediate need for additional capital.According to reports, three bankers — Rajiv Anand, deputy MD of Axis Bank, Rahul Shukla, group head commercial and rural banking at HDFC Bank, and Anup Saha, former MD of Bajaj Finance, are in the running for the position of the bank’s MD & CEO post.
The latter resigned on Monday.In May, Sebi imposed a trading ban on IndusInd Bank’s former CEO Sumant Kathpalia and four other senior executives over alleged insider trading. In its ex-parte interim order, the markets regulator said that prima facie there was a case that these executives traded in the bank’s stock while in possession of unpublished price-sensitive information (UPSI). In an exchange notification in March, the bank admitted for the first time that they had accounting irregularities in their derivatives portfolio that could impact their 2.35% of its net worth.