Private sector lender IndusInd Bank is looking to diversify its business by setting up insurance and mutual fund subsidiaries, managing director and CEO Romesh Sobti told FE in an exclusive interview. The Mumbai-headquartered bank is currently scouting for acquisition targets in the insurance and mutual fund space to start the new subsidiaries. While there is no deadline for completing the acquisitions, the bank would be open to evaluating opportunities as and when they come. “We want to see IndusInd Bank not only as a standalone banking entity, but as a conglomerate. We have learnt distribution of these products over the last 10 years. Therefore, we feel comfortable that we can now be manufacturers of them,” Sobti said.
Like many other banks, IndusInd Bank has been distributing insurance and mutual fund products of other companies. “We have learnt a lot about this business. Now there is a thought process that there is a strong rational for us to do it ourselves. This thought process will be carried forward in the next few years,” Sobti added. When asked if they are looking for companies of a particular size, Sobti said while the bank does not have any particular size in mind, it has to be of a size that does not disrupt the operations of the bank. “It has to be digestible and should not distract the management’s attention to the extent that the core business suffers. We will not bite more than we can chew.”
However, the size of the acquisition target will be different for different businesses. While an acquisition in the life insurance sector would be the most capital intensive, less capital will be required for a non-life insurance company, and a buyout in the mutual fund space would be the least capital intensive. In the December quarter, IndusInd Bank posted a net profit of Rs 936.25 crore and total income of Rs 5,473.54 crore. Its gross and net non-performing asset ratio was one of the lowest in the sector at 1.16% and 0.46% respectively. Its capital adequacy ratio stood at 15.83%. For FY2017, the bank’s net profit was Rs 2,867.89 crore and its total income was Rs 18,577.16 crore. “We haven’t reached the stage where we have gone to the board with a specific opportunity. But yes, we have started looking for opportunities,” Sobti said. The bank has been a strong player in selling mutual funds and well as in the distribution of life, non-life and health insurance products. Hence, it would be open to an acquisition wherever it spots an opportunity first.
Sobti said the bank’s acquisition strategy is two-fold: the acquisition must be accretive from day one and it must gives the bank either a specialisation or domain leadership. He said the bank would not acquire assets just for growing its balance sheet. In addition to inorganic growth, the bank is also very focused on organic growth. “The bank has gown at a compounded rate of 25-30% on various parameters. Continuing this momentum over the next 3-5 years is paramount in our minds. We will continue to grow the branch network. We see a strong linearity between branch network and business growth. We have already said we want to open 2,000 branches,” Sobti said. Shares of the bank closed at Rs 1,682.05 on the NSE on Tuesday, down 0.55% from the previous close.