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The regulator's approval is in accordance with the recently enacted Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023, which makes IndusInd Bank the first banking company where the promoter has increased their shareholding to 26 percent.
The Hinduja Group is looking to hike its stake in IndusInd Bank to upto 26 percent after the recent revision in Reserve Bank of India (RBI) guidelines on private bank ownership, multiple people aware of the development told CNBC-TV18.
Hinduja Group owned 16.51 percent stake, and 15.16 percent voting shares in IndusInd Bank via IndusInd International Holdings Limited (IIHL), Mauritius, as of December 2022, according to the shareholding pattern disclosed to exchanges.
“They (promoters) have to file the application with RBI, and are actively working on it,” said a person directly involved in the matter, adding that due process was being followed.
RBI in November 2021 revised private bank ownership guidelines to allow promoters to hold upto 26 percent stake, up from 15 percent earlier.
In January this year, RBI further released operational guidelines for this, re-iterating that promoters could hold upto 26 percent of the paid-up share capital or voting rights of the banking company after the completion of 15 years from commencement of business of the banking company.
RBI’s nod would be crucial for the promoters to hike their stake in the bank. The Hindujas, on earlier occasions too, have expressed their desire to hike stake in the bank.
There are certain pre-conditions that the promoters would have to comply with, for their application to be viewed favourably by the regulator, according to people familiar with the process. This could also include making their current shareholding in the bank free of encumbrances, among other conditions, as per people quoted earlier.
There are a few ways in which promoters could hike their stake, if permitted by RBI, explained a person directly involved in the matter. One of the ways would be for the promoters to acquire additional shares through the open market. However, this would be subject to the foreign shareholding in the bank not exceeding the stipulated cap of 74 percent under Indian laws.
“The current foreign shareholding is already about 66-67 percent, so there is limited headroom,” said this person.
The other way promoters could hike their holding in the bank would be via a Qualified Institutional Placement (QIP) or a preferential issue done by the bank, in which it could issue shares to the promoters.
“The bank is unlikely to consider capital raise in the near term given the healthy capital adequacy position and internal capital generation,” the person quoted earlier explained, so this route could be ruled out in the immediate future. IndusInd Bank's Total Capital Adequacy Ratio as stood at 18.01 percent as on December 31, 2022, with Tier 1 capital at 16.47 percent.
The promoters could consider either or a combination of the two routes to raise stake in tranches as well, according to people in the know.
First, however, the promoters would have to secure RBI’s explicit permission to increase their stake.
IndusInd Bank did not offer any comment on the story, and Hinduja Group’s comments were still awaited at the time of publishing this story.