IIHL to raise capital of $1.5 billion to fund RCap buy, increase holding in IndusInd Bank

The lenders had estimated the liquidation value of Reliance Capital at about Rs 12,500 crore.

IndusInd International Holdings Limited (IIHL), the promoter of IndusInd Bank, on July 3 said that it has decided to raise capital of $1.5 billion to increase its holding in IndusInd Bank and to fund its acquisition of debt-ridden Reliance Capital (RCap).

"The first objective is to increase promoter shareholding in IndusInd Bank from the current 15 percent to the proposed 26 percent. The second objective is towards equity participation for the Reliance Capital acquisition," the company said in a press release.

Reliance Capital acquisition by IIHL

In February 2022, 55 companies submitted expressions of interest for acquiring Reliance Capital, and 14 submitted non-binding bids by August 2022. By December 2022, only four investors – Hinduja's IIHL, Torrent Investments, the Cosmea-Piramal consortium, and Singapore’s Oaktree Capital, put in final bids.

Since the bids were below liquidation value, the committee of creditors (CoC) held an e-auction for revised bid prices, at which IIHL, Oaktree and Torrent Investments emerged as the top bidders.

The lenders had estimated the liquidation value of the company at about Rs 12,500 crore. Since the bid by IIHL is the sole one for Reliance Capital, the lenders will have to consider it.

In the second auction held on April 26, IIHL emerged as the sole and highest bidder, exceeding the Rs 8,640 crore offer by Torrent Investments in the first round of the auction held in December. Torrent and Oaktree did not participate in the second round.

Also read: Reliance Capital lenders approve Hinduja’s bid of Rs 9,661 crore for company

The second auction was deferred several times due to concerns raised by the lenders. Originally scheduled for April 4, the auction was postponed to April 11 after the bidders asked for changes in the request for resolution plan.

The minimum bid amount for the second auction was set at Rs 9,500 crore, based on net present value calculations, with a cash share of at least Rs 8,000 crore. As per the auction process, after the first round, the bid amount would increase by Rs 500 crore, and then by Rs 250 crore in subsequent rounds.

IndusInd Bank

India’s fifth-largest private sector bank by market capitalisation, IndusInd Bank was founded in 1994 by a platform conceived and promoted by Srichand P Hinduja, chairman of Hinduja Group of Companies at that time. The bank launched its initial public offering (IPO) in 1997 and raised $30 million.

The bank has shown strong financial over the years and for the quarter ended March 2023, the bank reported a profit of Rs 2040.5 crore, a 49.88 percent jump from Rs 1361.37 crore a year ago. The lender in the quarter ended March 2023 reported net interest income (NII) of Rs 4,669 crore, up by 17 percent Y-o-Y.

The bank’s deposits as of March 2023 stood at Rs 3.36 lakh crore, a 15 percent growth from Rs 2.93 lakh crore.

The lender's gross non-performing assets (NPA) were at 1.98 percent of gross advances as on March 31, 2023 as against 2.06 percent as on December 31, 2022. Net NPAs were 0.59 percent of net advances as on March 31, 2023 as compared to 0.62 percent as on December 31, 2022.