IndusInd Bank shares rise as SBI MF to buy 9.9% stake

Shares of IndusInd Bank rose over 1% in the opening trade on Thursday, in an otherwise subdued broader market, a day after the Reserve Bank of India (RBI) gave approval to the SBI Mutual Fund (SBI MF) to acquire up to 9.99% equity stake in the Hinduja Group-backed private sector lender. The shares of IndusInd Bank have witnessed strong rally in the recent past, rebounding 45% after hitting its 52-week low of ₹990.25 on February 1, 2023. The banking heavyweight touched its 52-week high of ₹1,475.50 on September 20, 2023.

Early today, IndusInd Bank shares opened higher for the second straight session at ₹1,436.95, up 1.1% against the previous closing price of ₹1,421.15 on the BSE. In the first hour of trade so far, the banking stock gained as much as 1.5% to ₹1,443.45, while the market capitalisation increased to ₹1.11 lakh crore.

The RBI on October 11 gave approval to SBI Mutual Fund (SBI MF), the mutual funds arm of the State Bank of India (SBI), to acquire 9.99% of the paid-up share capital in IndusInd Bank, the private lender says in an exchange filing on Wednesday.

“The approval has been granted with reference to the application made by SBIMF to RBI,” the release notes.

The central bank has asked SBI MF to “acquire the aforesaid major shareholding in the bank within a period of one year i.e., by October 10, 2024”. “Further, SBI MF must ensure that the aggregate holding in the Bank does not exceed 9.99% of the paid-up share capital or voting rights of the Bank at all times,” as per the regulatory filing.

The release further stated that the approval granted by the RBI, was subject to requisite approvals, and any other statutes, regulations and guidelines, as applicable.

The board of IndusInd Bank is scheduled to meet on October 18, 2023, to consider and approve financial results for the second quarter and half-year of the current financial year ended September 2023.

In the April-June quarter of FY24, the net profit stood at ₹2,124 crore as compared to ₹1,631 crore during the corresponding quarter of the previous year. The profit grew by 32% year-on-year (YoY), driven by strong net interest income (NII) and dip in provisions. The asset qualities improved for all businesses except vehicle finance, due to seasonality.

The Hinduja group bank's NII grew 18% YoY to ₹4,867 crore, while the net interest margin stood at 4.29% in Q1 FY24 against 4.21% for Q1 FY 23 and 4.28% for Q4 of FY23.

On the asset quality front, the bank's loan book quality remains "stable", with gross NPAs improving to 1.94% of gross advances in Q1 FY24 as against 1.98% in the year-ago period. Net NPAs stood at 0.58% versus 0.59% as on March 31, 2023. Provisions and contingencies for the quarter dipped 21% to ₹991 crore vs ₹1,251 crore in the year-ago period. The bank's total loan-related provisions accounted for ₹7,239 crore, which is around 2.4% of its entire loan book.

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