MUMBAI: Ashok P Hinduja, the chairman of IndusInd International Holdings, which is the promoter of the troubled IndusInd Bank, has said on Tuesday that it is an “opportune time to increase the stake” in the bank as and when the regulator permits but remained silent on immediate fund infusion into it following the crisis linked to forex derivatives losses.
"This is an opportune time as a promoter to increase stake. If this is the time at this price, we would like to increase stake," Hinduja said on the sidelines of a press conference to announce the completion of the acquisition of Reliance Capital here this evening.
IIHL has already got the in-principal approval from the Reserve Bank (RBI) to increase the stake in the bank to 26 percent from the current 15 percent. The promoter entity had previously pledged more than 50 percent of its holding in the bank to lenders and is feared to be pledging more given the likely huge losses due to the mismanagement of its forex derivatives book.
The company is waiting for the final approval from the RBI, he said.
"All communication responses have been given to the regulator. It is now left to the regulator when and how they will give us the approval," Hinduja said.
On March 10, the management of the bank had indicated that during an internal review of processes relating to ‘Other Asset and Other Liability' accounts of its derivative portfolio, the bank had noted some discrepancies.
While refusing to comment on the crisis at the bank, he said “unless PwC submits its report to the bank board, which I expect to come in by the next week, I cannot speak on the issue. As a promoter I cannot talk on the issue but only the board can speak.
“The board will fix the responsibility for the issue based on the PwC report, which they have promised by next week. Whether it was due to the error of one person or by many, the report will fix that and based on which the board will take a call,” Hinudja said .
After the bank informed the exchanges that due to accounting errors wherein it did not book the losses on its forex derivatives books for six-seven years, the bank will have to take a hit of around 2.35% of its networth in the March quarter (after RBI asked it to do so), Hinduja had told reporters that as the promoters, they are ready to infuse more capital into the bank. Many analysts are pegging the losses in excess of Rs 2,000 crore.
But today he evaded a question on infusing immediate capital into the bank.
On the acquisition of Reliance Capital (RCap), he said the management transfer of the non-banking financial company will be completed by Wednesday.
IIHL had paid Rs 9,861 crore (Rs 9,660 crore upfront and Rs 2,750 crore in equity capital) to the lenders of RCap whose exposures was three-times more at over Rs 30,000 crore after winning the bid through the insolvency resolution process last year. The deal got delayed as the company was not clearing the full payment.
RCap's lenders included Yes Bank, Bank of Baroda, Indusind Bank, Andhra Bank, IDFC Bank, ICICI Bank, IDBI Bank and Federal Bank among others. The company owed the money to these lenders through its subsidiaries Reliance Commercial Finance (Rs 11,620 crore), Reliance Home Finance (Rs 7,430 crore ), and standalone Reliance Capital (Rs 6,750 crore). that apart it also owed Rs 4,500 crore to NCD subscribers.
The last payment of Rs 4,500 crore of NCD subscription was credited to the designated Barclays account only at around 5.30 pm Tuesday, just half an hour before Hinduja was to officially announce the deal completion, a private sector bank which had exposure to RCap told The New Indian Express this evening.
The Hindujas plan to expand its BFSI portfolio after the acquisition of RCap's business, and the management transfer is likely to take place on Wednesday, Hinduja said.
"The transaction from our side is over. As we are speaking, money is moving from one escrow to another," Hinduja added.
The journey for value creation would now begin, he said, adding the value of the RCap business on a conservative basis would be Rs 20,000 crore.
With regard to subsidiaries, he said there are about 39-40 entities of RCap and the new management would divest many of them as they are mostly small shell entities with small businesses.
The financial services firm has 1.28 lakh employees and the new management would protect the interest of employees to the extent possible, he assured.
In April 2023, IIHL emerged as the successful resolution applicant by winning the bid for RCap under the insolvency process with an offer of Rs 9,650 crore.
RCap was placed under an RBI administrator in November 2021 due to governance lapses and payment defaults associated with the Anil Ambani Group.