Hindujas' plan to hike stake in IndusInd Bank likely to face delays

The legal battle in the Hinduja family, which could result in a partition of family assets, is likely to delay their plan to increase stake in IndusInd Bank. 

The bank is promoted by holding companies IndusInd International Holdings and IndusInd, which are predominantly controlled by Ashok Hinduja, the youngest among the four Hinduja brothers. 

Promoters of IndusInd Bank have increased their stake from 14.34 per cent in the March quarter to 14.93 per cent through a warrant conversion earlier this month and open market share purchases. Under the existing Reserve Bank of India (RBI) rules, promoters can hold up to 15 per cent in a private bank. 

The Hindujas had sought permission from the banking regulator to raise their stake to 26 per cent in IndusInd Bank in March. 

Sources in the know said the regulator had sent queries to promoters on the nature of funds to be infused into the bank as capital. “The intention of the regulator was to understand how the capital would be brought into the bank; whether the funds to be infused have any debt or lien attached to them or are a part of any pending litigation/settlement plan involving the Hinduja family,” said a source with knowledge of the developments. 

These questions were put forth to IndusInd Bank’s promoters earlier this month, to which they have sent their responses. Without divulging much information, a Hinduja group spokesperson said the group is cash rich and is well-positioned to bring in the money into the bank. 

In a statement to media issued on Wednesday by brothers Gopichand, Prakash, and Ashok Hinduja, the family said that the ongoing litigation will not have any impact on their global businesses including Indian operations. 

“Upon satisfactory outcome of the due diligence process, which is ongoing at the regulator’s end, approval for the promoters to hike their stake to 26 per cent in IndusInd Bank is likely to come through in a month or so,” said another person involved in the process. 

Asset quality issues first cropped up in September 2018 due to IndusInd Bank’s Rs 3,000-crore exposure to beleaguered Infrastructure Leasing & Financial Services (IL&FS). Since then, the bank’s stock price has been on a shaky footing. 

In the past year, the IndusInd Bank stock has shed 67 per cent in value, though in the recent months the news of promoters’ capital infusion and interest from other investors has lent it some support. As of March, IndusInd Bank’s capital adequacy stood at 15.04 per cent, well above the regulatory threshold, while its gross non-performing assets ratio of 2.45 per cent was the worst in six years.