The billionaire Hinduja family paid a premium to boost its stake in IndusInd Bank Ltd., a sign of confidence in the Indian private-sector lender as concerns over its asset quality ease.
IndusInd International Holdings Ltd., which represents the bank’s founding Hinduja clan, completed a rights issue to fund the conversion of warrants to shares in the Mumbai-based bank, it said in a statement late Tuesday. The warrants will be redeemed at 1,709 rupees a share, a 61% premium over Tuesday’s close.
The holding company also plans to sell some other investments to finance the 20.2 billion rupee ($277 million) warrant redemption, it said.
Billionaire Srichand P Hinduja founded IndusInd Bank in 1994. The family’s holding in the lender shrank to 13% following its merger with the nation’s largest microlender Bharat Financial in July 2019. This week’s conversion comes after the family paid 6.7 billion rupees to redeem 25% of warrants that year.
“The conversion of warrants to equity will strengthen investor confidence in the bank as it shows the founders’ commitment in the long-term growth of the bank,” said Kranthi Bathini, director of WealthMills Securities Ltd.
{{/usCountry}}“The conversion of warrants to equity will strengthen investor confidence in the bank as it shows the founders’ commitment in the long-term growth of the bank,” said Kranthi Bathini, director of WealthMills Securities Ltd.
{{/usCountry}}Shares of IndusInd Bank fell 1.6% at 10:29 a.m. in Mumbai. The stock has more than tripled from a low in March 2020, when the government-backed rescue of peer Yes Bank Ltd. soured sentiment for private lenders. The rebound has come as IndusInd’s deposit base and asset quality improves.
The decision “to redeem the warrants at a premium over the prevailing share price stands testimony to the strong trust and confidence in IndusInd Bank’s management and its strategic direction,” the company said in the statement.
The funds will be paid by February 18, as permitted by the Securities and Exchange Board of India, which had earlier granted extensions due to the pandemic, the firm said.