Private sector IndusInd Bank on Wednesday said it has approved allotment of preferential shares to marquee investors to raise Rs 2,495.79 crore. The Finance Committee of the board of directors at its meeting held on September 2, 2020, approved allotment of 4,76,29,768 equity shares of the face value of Rs 10 each at a price of Rs 524 per share on a preferential basis, for an aggregate consideration of Rs 24,95,79,98,432.
The allottees to the bank’s shares are: Route One Offshore Master Fund, LP (1,06,93,264); Route One Fund I, LP (71,59,788); ICICI Prudential Life Insurance Company Ltd (1,62,21,374); Tata Investment Corporation Ltd (57,25,190) and AIA Company Ltd (78,30,152). ”Consequently, the issued, subscribed and paid-up equity share capital of the bank stands increased from the present level of Rs 6,93,56,60,380 (divided into 69,35,66,038 equity shares of face value of Rs 10 each) to Rs 7,41,19,58,060 ( divided into 74,11,95,806 equity shares of face value of Rs 10 each),” the bank said.
The allotment is part of the bank’s resolution passed by shareholders in the extraordinary general meeting on August 25, 2020, for issuance of preferential equity shares to qualified institutional buyers (QIBs) and the promoters. In July, the board of directors of the bank had cleared the proposal for Rs 3,288 crore capital raise from these marquee investors and the promoter group.
The rest of Rs 792.16 crore will come from the promotor group (Hinduja Capital Ltd and IndusInd International Holdings Ltd) in lieu of preferential allotment of 1,51,17,477 shares to them. Shares of IndusInd Bank closed at Rs 640.75 apiece on BSE, up 2.08 percent from the previous close.
The stock rallied after it was upgraded from sell to buy by UBS along with SBI
Shares of IndusInd Bank and SBI surged after the global financial firm UBS elevated these stocks from ‘sell’ to ‘buy”.
Year on year the “Bank stocks are down 12-62 percent and have underperformed the broader markets. USBbelieves the sector’s downside risks are limited and upgrade IndusInd Bank and SBI from selling to buy.”
For Indusind Bank USB has set a target price of Rs 675 and Rs 260 for SBI.
“USBreduced FY21E GNPL construction and credit expenditures but raised the NIM estimates, which ultimately resulted in a17-115%upgrade in FY21E earnings for the banks. according to them, the estimates are 4-30 percent higher than agreement for select coverage banks.
“Share price of the banking companies are trading below the five-year average and the expectations for most of the banking stocks are to trade around the valuations of the five-year average. Though asset quality risks for IndusInd Bank and SBI remain higher than peers, the current valuations reflect most negatives, driving the upgrades.
According to USB, the government and RBI relief measures in terms of supplementary liquidity infusion safeguarded funding for SMEs, and the tail risks in the banking system are minimum because of loan restructuring rules for all segments, in the past few months.
The bank is careful on lending and concentrating on balance sheet granularity
IndusInd Bank (IIB) reported operating profit growth of 13% YoY and 2.5% QoQ on the back of 16.4% YoY and 2.5% QoQ growth in NII and decline in open (down 1% YoY, 11.4% QoQ) even as the loan book contracted by 4.2% QoQ. On a YoY basis, the loan book grew by 2.4%. The strong NII growth came on the back of a healthy NIM of 4.28%, which expanded by 23bps YoY and 3bps. This is despite the fact that the balance sheet liquidity increased significantly. Deposit inflows were good as indicated by 5.3% QoQ growth, though the focus remained on accreting granular retail deposits by offering a higher rate. Going forward, the strategy is to improve balance sheet granularity. In line with this, the bank shed some high-rate corporate deposits during the quarter. The cost of deposits fell to 5.73% from 6.05% in 4QFY20, which also helped to some extent in margin expansion. Provisions remained high at Rs22.6bn, with the objective being to increase the PCR by