Analysts have expressed concerns about the bank’s focus on wholesale lending as also its asset quality. Commentary from the management after the Q4 results helped allay concerns on the first of these, but worries around credit quality remain.
IndusInd International Holdings and IndusInd Limited, promoters of IndusInd Bank, will raise stake in the bank within limits set by the Reserve Bank of India (RBI), exchanges were informed on Sunday. The stake currently held by the promoter group in the paid-up share capital of the bank stands at 14.68% and it can go up to 15% under the extant norms.
The bank’s stock ended 6.89% higher than its previous close at Rs 451.65 on the BSE on Monday on the news of the promoters’ plan to hike stake. “We have to inform that we shall now purchase additional shares from open market in India, within the overall regulatory prescribed promoter equity holding cap,” the promoter group told the bank’s management, according to the communication to the exchanges.
Earlier this year, IndusInd Bank’s promoters had expressed a wish to increase their stake in the bank to 26%, a proposition which, the latest notification suggests, may have been declined by the regulator. According to the RBI’s norms, a bank’s promoter must bring down their stake to 40% within three years of its launch. Thereafter, the promoter stake must be further reduced to 20% within 10 years and to 15% within 15 years.
This year saw the resolution of a year-long court battle between the RBI and Kotak Mahindra Bank promoter Uday Kotak, with the regulator telling Kotak to bring down his stake to 26% by August this year. After a qualified institutional placement (QIP) and a block deal held over the last fortnight, Kotak now holds 26.1% in the bank.
IndusInd Bank’s stock has lost nearly 71% in the last one year amid concerns around the lender’s asset quality. Its capital adequacy ratio stood at 15.04% as on March 31, up from 14.16% a year ago.
Analysts have expressed concerns about the bank’s focus on wholesale lending as also its asset quality. Commentary from the management after the Q4 results helped allay concerns on the first of these, but worries around credit quality remain. In a post-results note, Kotak Institutional Equities (KIE) wrote, “The short-term issue that needs to be addressed is asset quality and balance sheet liquidity.” The brokerage added that with the entire retail loan portfolio of the bank under moratorium, it would be hard to forecast near-term credit costs or slippages. “We are less optimistic at this point and build in slippages of 3% with credit costs at 3.5% for FY21,” KIE said.