MC EXCLUSIVE IndusInd Bank said to have kick started $1 billion equity raise plans

IndusInd Bank

Ground work may have started at IndusInd Bank for a billion dollar fund raise. Highly placed sources aware of the matter say a very closely knit team which is part of the CFO’s office is tasked with the capital raise efforts.

Sources also indicate while the bank is keeping all options open for an equity raise – such as a qualified institutional placement or a preferential issues, the bank may ultimately opt for a preferential issue to raise equity.

Citi, which has worked with IndusInd Bank on multiple occasions in the past, is said to be engaged with the bank for the capital raise. While the timelines are not very clear yet, sources indicate that the bank plans to conclude the fund raise in a month or two, by January end. “The bank is clear that it will not raise capital at below book value and given the stock price appreciation in the last few week, capital raise may happen slightly above the book value,” said a banker.

Bankers indicate that the equity raise may be priced between Rs 875 - 950 per share, depending upon the feedback from investors.

For IndusInd Bank, the fund raise is expected to help the ongoing clean-up of financials and bolster its capital position ahead of ECL (expected credit loss) adoption in FY27.

“IndusInd Bank categorically denies having such discussions. The query is speculative and factually inaccurate,” said a spokesperson for the bank.

Funding details

Sources further indicate that IndusInd Bank’s MD & CEO, Rajiv Anand is currently in Singapore meeting investors. The incoming investor subscribing to the preferential issue is expected to pump in about Rs 6,000 – 7,000 crore of fresh capital into the bank, while its promoters, primarily IndusInd Holdings Limited is expected to invest Rs 2,500 – 3,000 crore of capital to retain the promoter’s overall stake at 15 percent.

IndusInd Holdings has 12.05 percent stake in IndusInd Bank while 3.77 percent is held by IndusInd Limited. Both entities collectively are referred to as promoters of the bank holding 15.82 percent stake on a fully dilutive basis, though a little over 50 percent of promoter’s stake is under encumbrance.

The bank is said to be in talks with large sovereign funds such as GIC for a capital raise. “There are talks ongoing with large global pension funds as well,” said a banker aware of the equity raise plans.

Why fresh capital is critical

Equity raise for the bank will be critical on two fronts. Firstly, with the new MD & CEO stepping in, a reasonable amount of kitchen sinking is said to be underway. “All business are under review and Rajiv is clear that FY27 should start on a clean slate. That means, in Q3 and Q4 FY26, credit costs could be elevated if certain write off should be considered,” said a senior official who did not want to be named. To be sure, the bank has taken a provisioning hit of Rs 4,391 crore so far in FY26 and it’s net profits have plunged by 95 percent year-on-year to Rs 167 crore for the first half of the current fiscal.

Secondly, while the finer guidelines for expected credit loss (ECL) adoption is awaited, most banks have started reviewing the impact of ECL on their financials and accordingly making provisions for the bank. “IndusInd Bank too will have to gear up for the ECL adoption and fund raise ahead of FY27 becomes critical,” said another bank official who was not authorized to speak to media.

In June this year, IndusInd Bank’s board approved a capital raise program split as Rs 20,000 crore of debt instruments and Rs 10,000 crore of equity. It also allowed the bank’s promoters to nominate upto two directors on the bank’s board, though that is yet to materialize.

Fresh capital at above book value

Currently trading at Rs 829 a share, IndusInd Bank stock has gained 9 percent in the bourses, outperforming BSE Sensex’s returns of 1.5 percent. At these levels, the stock is likely trading at or just a shade below book value. It has also significantly appreciated from the Rs 660 levels seen on March 11, a day after the bank made public about treasury related issues in its financials.

While investigations are ongoing by multiple agencies including the Economic Offences Wing (EOW), a preliminary finding by the EOW indicated that the probe so far does not point at siphoning of funds at the bank. Moneycontrol was first to report the same on October 16.