Billionaire Hinduja family pays 61% premium to boost IndusInd stake

The family's holding in the lender shrank to 13% following its merger with the nation's largest microlender Bharat Financial in July 2019

The Hinduja family paid a premium to boost its stake in IndusInd Bank, a sign of confidence in the Indian private-sector lender as concerns over its asset quality ease.
 
IndusInd International Holdings (IIHL), which represents the bank’s founding Hinduja clan, completed its rights issue, which was oversubscribed at over Rs 2,021 crore, it said in a statement late Tuesday. The warrants will be redeemed at Rs 1,709 a share, a 61 per cent premium over Tuesday’s close.
 
“IndusInd International Holdings Ltd (IIHL), one of the bank's promoters, confirmed having completed its capital raising through rights issue which was oversubscribed by their shareholders," said the bank in an exchange filing late night Tuesday.
 
The rights issue was oversubscribed and IIHL raised capital at an overwhelming premium of 1,400 per cent towards the subscription of this rights issue, IIHL said in a statement.
 
"This reiterates the confidence of IIHL’s global shareholders, spread across 34 countries, in the decision of IIHL and its subsidiary, IndusInd, to redeem the balance of 75 per cent of the warrants at the price of Rs 1,709 per share (a huge premium over the current market price of Rs 1,059), aggregating to Rs 2,021.45 crore," IIHL said.
 
The holding company also plans to sell some other investments to finance the $277 million warrant redemption, it said.

 
Billionaire Srichand P Hinduja founded IndusInd Bank in 1994. The family’s holding in the lender shrank to 13 per cent following its merger with the nation’s largest microlender Bharat Financial in July 2019. This week’s conversion comes after the family paid Rs 6.7 billion to redeem 25 per cent of warrants that year.
 
“The conversion of warrants to equity will strengthen investor confidence in the bank as it shows the founders’ commitment in the long-term growth of the bank,” said Kranthi Bathini, director of WealthMills Securities.
 
Shares of IndusInd Bank fell 1.6 per cent at 10:29 a.m. in Mumbai. The stock has more than tripled from a low in March 2020, when the government-backed rescue of peer YES Bank. soured sentiment for private lenders. The rebound has come as IndusInd’s deposit base and asset quality improves.
 
The decision “to redeem the warrants at a premium over the prevailing share price stands testimony to the strong trust and confidence in IndusInd Bank’s management and its strategic direction,” the company said in the statement.
 
The funds will be paid by February 18, as permitted by the Securities and Exchange Board of India, which had earlier granted extensions due to the pandemic, the firm said.