Shares of IndusInd Bank gained 1% and hit its 52-week high in opening trade on Tuesday after Hinduja group firm IndusInd International Holdings Ltd (IIHL), the promoter of the private lender, unveiled plan to raise $1.5 billion (about ₹12,300 crore) to increase its stake in the bank. A part of the raised capital will also be used to fund its proposed acquisition of Reliance Capital. Currently, IIHL holds a 15% shareholding in IndusInd Bank and plans to raise its stake to 26%.
Reacting to the news, IndusInd Bank shares opened higher at ₹1,386.30 against the previous closing price of ₹1,379.65 on the BSE. In the first hour of trade so far, the banking heavyweight gained as much as 1% to touch its fresh 52-week high ₹1,393.65, while the market capitalisation rose to ₹1.07 lakh crore. The stock has risen 76% against its 52-week low of ₹789.75 on July 13, 2022.
IIHL in a release said the company has taken a strategic decision to expand its business horizon in India and other global geographies, in the banking, financial services, and insurance (BFSI) sector. “This strategic decision opens boundless opportunities to expand IIHL’s business horizon in India and other global geographies, in the BFSI sector. IIHL’s aspirations will not be capital constrained as raising capital for IIHL is not an issue at all,” says Ashok P. Hinduja, Chairman, IIHL.
“The board also approved the capital raising of up to $1.5 billion to meet its twin strategic objectives. The capital raise will pave the way for more acquisitions across geographies, including in the GCC countries with particular focus on the UAE,” IIHL said.
The first objective of the capital raising is to increase its promoter shareholding in IndusInd Bank to 26%. In terms of RBI guidelines on ‘acquisition and holding of shares or voting rights in banking companies’, the promoters of IndusInd Bank are eligible to increase their shareholding in the bank by following the procedure laid down subject to the assessment of ‘fit and proper’ status by RBI. Accordingly, the board of directors of IIHL, has resolved to undertake capital raise in a phased manner to mobilise the required funds for infusion.
In 2021, Hinduja Group had infused ₹2,021 crore into the bank by the conversion of preferential warrants into equity shares.
The second objective of the capital raising is towards equity participation for the Reliance Capital acquisition. “On July 3, the administrator has issued the duly signed letter of intent.” IIHL was the sole resolution applicant with a bid amount of ₹1.2 billion (₹9,650 crore) in the process run under IBC for Reliance Capital. The underlying operating companies in Reliance Capital are in insurance (Life, General and Health), asset reconstruction, broking, etc., and augur well to meet IIHL’s aspirations in the BFSI sector.
The company further stated that global private equity funds have expressed interest in participating in IIHL’s growth story. “The company is likely to be listed by the next year and this would also give a trading option to its numerous shareholders who have stayed with the company for over 3 decades,” it added.
IIHL recently acquired a majority holding in a bank in the Commonwealth of The Bahamas and has also received an in-principle approval for a banking license in Mauritius, thereby exploring options to set up a Greenfield Bank or consider inorganic acquisition. The company is in the process of acquiring asset management and wealth management businesses in order to complete its BFSI (para banking) suite.
IIHL board has also recommended a special interim dividend at the rate of 10% to reward its shareholders. The board has also approved a buyback scheme for partial dilution for its original shareholders at $20 (Face value of $1), buyback offer letter to be shared in due course.
With a $1.67 billion net asset value, the company aspires to be a global financial services institution with a commitment to excellence in international orientation, innovation, speed and strict compliance with the principles of good corporate governance.
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