The Reserve Bank of India (RBI) has given in-principle and conditional approval to IndusInd International Holdings Ltd, a Hinduja Group entity, to raise its stake in IndusInd Bank to 26%, four people aware of the development told.
This will result in the Hinduja Group investing over $1 billion in the lender, one of the persons said.
Promoter holding in the bank is 16.51% – IndusInd International Holdings had 12.58% and IndusInd Ltd had 3.92% on December 31, 2022, according to a stock exchange disclosure. “To increase stake in the bank, Hinduja Group may need to infuse ₹10,000-11,000 crore ($1.2-1.3 billion). They may infuse the money by issuing preferential shares,” said the person cited above.
IndusInd Bank’s shares closed at ₹1,075 on the Bombay Stock Exchange, up 3.25%, for a market cap of ₹83,388 crore.
The Hinduja Group, IndusInd Bank and the RBI did not respond to queries.
The Hinduja family’s businesses span banking, chemicals, information technology and healthcare.
Bank Promoter Stake Limit
Ashok Hinduja, chairman of the Hinduja Group of Companies (India), had said in a November 2021 interview that the promoters would enhance their stakes in multiple tranches to 26% once they received central bank approval.
In November 2021, the RBI allowed promoters to increase their stakes to 26% from 15%, following the recommendation of an internal working group to review ownership guidelines and corporate structure pertaining to Indian private sector banks.
This followed a legal tussle between Kotak Mahindra Bank promoter Uday Kotak and the RBI.
The central bank had imposed a penalty of Rs 2 crore on the private bank for noncompliance with regulatory norms on diluting promoter stakes within a prescribed timeline. Kotak Mahindra Bank challenged this in the Bombay High Court in December 2018, stating that it had adhered to the guidelines.
The promoter’s holding in Kotak was at 29.9%. The RBI was of the view that this should be lowered to 20% by December 2018 and 15% by March 2019.
Though the issue was resolved out of court and Kotak was allowed to retain up to 26% stake, the RBI set up a committee to review promoter shareholdings in private banks. In May 2020, Kotak Mahindra Bank raised Rs 7,442 crore, which helped lower the promoter stake in the bank to 25.95%.
In March 2021, promoters of IndusInd, the Hinduja brothers, asked the RBI to allow them to raise their stake in the bank.