Mumbai: The Hinduja Group-promoted private sector lender IndusInd Bank Ltd got a three-year extension from the banking regulator to pare the promoters’ stake in the bank to 10%.
The bank recently raised at least Rs480 crore by selling 54.8 million shares to qualified institutional investors, bringing down the promoters’ stake from 25.63% to 22.2%. Even after this, the promoters were to reduce their stake by another 12.2 percentage points by March, to comply with the guidelines of the Reserve Bank of India (RBI).
They would not do so now as RBI has given the bank time till December 2012.
A formal communication from RBI was sent to the bank in late August after the qualified institutional placement (QIP) offer was over.
Confirming the development, Romesh Sobti, managing director and chief executive of IndusInd Bank, said, “We have received a formal communication from RBI on the fresh road map for diluting the promoters’ stake (in the bank).”
Graphics: Ahmed Raza Khan/Mint
According to him, the promoters will have to dilute their stake to 10% in the next three years.
In its presentations to institutional investors in the run-up to the QIP issue in early August, IndusInd had said, “In the course of ongoing discussions and correspondence with us, the RBI has stated that our promoters will need to reduce their shareholding to less than 10% of our total outstanding equity shares by the end of the current fiscal year. Any such divestment process could adversely affect the price of our equity shares.”
RBI’s guidelines on ownership in private banks, released in February 2005, said no entity or group would be allowed to hold over 10% stake in a private sector bank directly or indirectly.
The central bank also said no investor can buy over 5% stake in any bank without its approval. The objective was to broadbase the shareholding pattern and ensure corporate governance.
The RBI norms also stipulate that all banks need to have a minimum Rs300 crore networth.
However, the central bank has not set any deadline for the industry to pare the promoters’ stakes and raise the networth. Instead, it has been directing individual banks on these two critical issues, depending on their health and quality of governance.
Unable to conform to these norms, promoters of quite a few private banks, including Ganesh Bank of Kurundwad Ltd, Sangli Bank Ltd and Lord Krishna Bank Ltd have sold out to relatively larger private players in the recent past.
In 2007, RBI had stopped IndusInd Bank from opening new branches as its promoter holding was way above the permissible limit. Another private bank denied new branch licences around the same time was Dhanalakshmi Bank Ltd and for the same reason.
After the promoters started diluting their stake in June this year, IndusInd Bank received RBI’s nod to open 30 branches. With this, IndusInd will have 210 branches across India.
The regulator has also approved 66 branch licences for Dhanalakshmi Bank. This will strengthen the bank’s branch network to 273.
A 3 June Mint report quoted an IndusInd Bank official saying the lender has applied to open another 140 branches.
At the end of June, the bank’s total assets were Rs27,800 crore, up from Rs27,600 crore at March-end. The bank’s net profit for the first quarter of fiscal 2010 was Rs86.49 crore, a growth of over three times compared with the corresponding period last year.
The bank’s non-performing assets as a percentage of loans dipped to 1.01%, from 2.14% during the June quarter.
Ahead of the recent equity issue, IndusInd Bank’s promoters held a 19.3% stake under IndusInd International Holdings Ltd, a 4.37% stake under IndusInd Ltd and 1.97% through De Five (Mauritius) Holdings Ltd.
The bank shortlisted 32 qualified institutional buyers to allot 54.8 million equity shares. The list of investors who actually bought stakes included Templeton Asset Management Ltd and firms from the stable of Goldman Sachs and Blackstone Group.
IndusInd Bank is one of the nine private banks that got RBI licence to start business when the regulator opened the sector in 1994. Till May 2004, the promoters of the bank were holding a 41.32% stake, but it fell to 31.3% when Ashok Leyland Finance Ltd, a non-banking financial company, was merged with the bank.
The bank issued global depository receipts in 2007 and 2008 and these brought down the promoters’ stake first to 28.45% and later to 25.63%.
The IndusInd stock fell marginally on the Bombay Stock Exchange on Friday to end at Rs99.80 even as the Sensex, the exchange’s bellwether index, rose by 1.89% to close at 15,689.12.
Anita Bhoir contributed to this story.