Indusind Finance Plans Buyback Of Unlisted Shares

The Hinduja-promoted investment vehicle IndusInd Enterprises & Finance Ltd (IEFL) has proposed a buyback of its unlisted shares in a bid to "provide an exit route to the shareholders."

IEFL has promoted and invested in the equity of IndusInd Bank Ltd and IndusInd Media & Communications Pvt Ltd. IEFL had issued Rs 100-face value shares at par which were traded at a premium. The shares were later split into Rs 10 shares.

The company feels that the buyback of shares will have a positive effect on investing community and will also provide an exit route to the shareholders. With the shares being unlisted the investors in IEFL, which consist of members from the Sindhi community, had not exit route. They have been stuck with these shares for quite some time.

 

The same is the case for the shares of IndusInd Bank Ltd which have not been listed. However, with the proposed public issue in the near future the investors of the bank will soon have an exit route.

The government is making changes in the companies act which is expected to provide for purchase of the shares by the company. These shares will be allowed to be held or reissued or to reduce the equity capital. In anticipation of these amendments, the IEFL board has sought the shareholders' okay to pass a resolution to buyback shares.

With this empowerment to buy own shares, IEFL's management would be in a position to use the surplus fund of the company more advantageously with minimum risk.

The profit before tax of Rs 15.04 crore for the year ended March 31, 1997 is an improvement on Rs 18,26 crore for the previous period of 16 months. The profit for this year has been computed in accordance with the prudential norms stipulated by the Reserve Bank in respect of non banking financial companies. The profit would have been higher under the conventional methods of accounting. The company has made a provision for taxation of Rs 2.04 crore as compared to nil for the previous.

Since the company has followed the prudential norms fixed by RBI has resulted non recognition of lease rentals accrued and due during the year was Rs 2 crore and non recognition of income by way of interest on loans falling due during the year was Rs 99 lakh.

The operating profit was Rs 18.73 crore for the year ended March 97 and Rs 21.49 crore for the previous 16 months.