Are the shareholders of Indusind Bank Ltd (IBL), which is promoted by the Hinduja Group, being short changed? In a scenario when all big banks in India own a Mutual Funds (MF) business, the model of which is an open architecture, why is Indusind Bank Ltd. (IBL) giving way to its promoter entity Indusind International Holdings (IIHL) to own MF business and not doing the same itself?
IBL CEO Sumanth Kathpalia has repeatedly said that they want to expand the banks portfolio and get into MF, insurance and broking business like all big banks including HDFC, ICICI, Axis, Kotak are doing. It is for this reason that IBL has even sought permission from the Reserve Bank of India (RBI) to get into para banking. But even as Kathpalia is engaged in mere lip service to IBL shareholders, Hinduja Group holding company IIHL, which has a 12 per cent stake in IBL, has formed a joint venture (JV) for MF business in India with Invesco, one of USA's large asset management companies. As per the deal, the Mauritius based IIHL will hold 60 per cent stake in the JV while Invesco will have 40 per cent - IBL with 85 percent public shareholders is left high and dry even as promoters will make hay when the sun shines.
Did IBL "specifically" request the RBI for an urgent approval for para banking since it wanted to buy a stake in Invesco and get into the business like others? Why should the IBL shareholders not only feel dejected but even short changed? Especially since Ashok Hinduja, the IIHL promoter, has announced that their valuation will be around $50 billion in the Banking Financial Services And Insurance (BFSI) space by 2030. Is this not a loss of opportunity for IBL shareholders, since the bank's promoters are taking away their cake and emerging as a parallel competitor to the bank?
IIHL has 600 shareholders mainly spread across Europe. There are no public disclosures on the identity of IIHL shareholders and nobody including regulators in India have any clue of who these shareholders are. The only thing that everybody knows is that IIHL is a Hinduja Group holding company and a promoter of IBL.
The fact that IBL was aspiritional for MF, insurance and broking businesses but its promoter entity IIHL is already on an acquisition spree in the same areas, is an important point to ponder upon for the bank's public shareholders. IIHL has also emerged as a successful bidder for debt-laden Reliance Capital (RCAP) and has missed two deadlines to make good the payment to the lenders. IIHL is in the process of raising funds for the acquisition. Around 50 percent of Hinduja Group's holding in IBL was pledged in the past and remains with the lenders. For all the acquisitions that it is engaged in currently, including the Invesco and RCAP deal, IIHL has to raise more funds. In addition it has also got permission from RBI to hike its stake in IBL to 26 per cent
Promoter holding in Indusind Bank is 16.51 percent and the RBI has already given its in principle approval to Hinduja's to raise their stake in the bank up to 26 per cent. Currently, all the assets in the para banking space are being acquired by IIHL. In future if it tries and manages to sell even a part of these assets to IBL, then will it not simply mean that IIHL and Hinduja Group will have enriched themselves at the cost of the bank's public shareholders?
These are questions even the regulators like RBI and SEBI should take into consideration. Emails sent to IBL remained unanswered. We will incorporate their response to the story as and when received.
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