Promoters Have Always Supported The Bank, Irrespective Of Stock Price: IndusInd Intl Holdings

Summary

In this interview, Ashok Hinduja, Chairman of IndusInd International Holdings, addresses recent concerns surrounding IndusInd Bank, including a significant drop in stock price due to discrepancies in the bank's derivative portfolio. Hinduja emphasizes his confidence in the management's transparency and assures investors of the promoters' continued support. He discusses the CEO's one-year extension, the bank's capital adequacy, and the delay in receiving final approval from the RBI to increase their stake. Hinduja also clarifies that no margin calls have been made on pledged shares and reassures that the promoters remain committed to the bank's long-term growth.

Takeaways

• 😀 Ashok Hinduja, Chairman of Indescent International Holdings, expressed full confidence in the bank’s management and its ability to address current issues.
• 😀 Despite recent concerns regarding a 25% drop in stock price due to discrepancies in the derivative portfolio, Hinduja reassured that the financial strength of the bank remains intact.
• 😀 Hinduja acknowledged that the derivative issue was a technical problem, but stressed that it would be resolved soon, given the bank’s strong operating profit for the year.
• 😀 He confirmed that the promoters were aware of the issue only after the management disclosed it and stressed that the delay in communication was not ideal but believed the transparency should be appreciated.
• 😀 Hinduja emphasized that while there have been lapses in the management, the issue is not indicative of systemic problems, and he requested shareholders to remain calm and not panic.
• 😀 The CEO's one-year extension by the RBI, as opposed to the three-year extension initially sought, was acknowledged, with Hinduja saying that performance would influence any future decisions.
• 😀 Hinduja reiterated the promoters' long-term commitment to IndusInd Bank, citing past capital infusions even when market conditions were less favorable.
• 😀 Regarding the bank’s stake hike from 15% to 26%, Hinduja confirmed that they have received in-principle approval from the RBI and are awaiting the final approval to proceed.
• 😀 Hinduja clarified that there were no margin calls on the pledged shares of the promoter entity, despite the fall in the stock price, and that there were no plans to create more pledged shares for the time being.
• 😀 Hinduja responded to questions about succession planning, stating that the decision on the CEO's renewal rests with the board, and the promoters are not directly involved in this matter.

Q & A

What is the main issue that IndusInd Bank is currently facing?

IndusInd Bank is facing credibility concerns due to discrepancies in its derivative portfolio, which were disclosed after nearly six months. This led to a significant drop in the bank's stock value, raising concerns among investors.

What has been the impact of the derivative portfolio issue on the bank’s stock?

The disclosure of the discrepancies caused the bank's stock to fall by nearly 25%, resulting in a substantial loss of market capitalization, amounting to around 18,000 crores.

What is Ashok Hinduja’s stance on the bank’s management handling the issue?

Ashok Hinduja, the Chairman of IndusInd International Holdings, expressed confidence in the bank's management and board, stating that similar issues have been resolved successfully in the past. He believes this issue will also be resolved.

Was Ashok Hinduja aware of the derivative discrepancies prior to the disclosure?

No, as a promoter and not part of the board or management, Ashok Hinduja was unaware of the issue until the disclosure was made. He emphasized that such issues are typically handled by the management and board.

What does Hinduja suggest regarding the investors’ reaction to the issue?

Hinduja advises investors not to panic, emphasizing that such issues are common in the banking industry. He reassured them that the financial impact of the issue is not significant, with the capital adequacy ratio remaining strong.

How does Hinduja justify the delay in the disclosure of the derivative discrepancies?

Hinduja defends the bank’s transparency, stating that it was the management's decision to disclose the issue and make provisions for it, which he believes should be appreciated by the market. He also noted that such technical issues are not uncommon in banking.

What is Hinduja’s position on the Reserve Bank of India (RBI) granting a one-year extension to the CEO instead of three years?

Hinduja did not express a strong opinion on the RBI’s decision to grant only a one-year extension to the CEO. He stated that the board and RBI are responsible for such decisions, and he trusts the board's judgment.

Has there been any indication that the promoters might infuse additional capital into IndusInd Bank?

Yes, Hinduja confirmed that the promoters have always supported the bank through capital infusions in the past, regardless of market conditions. He assured that if necessary, they are willing to inject more capital into the bank to maintain its stability.

What is the status of the promoter's proposal to increase their stake in IndusInd Bank to 26%?

The promoter has received in-principle approval from the RBI to increase their stake from 15% to 26%. However, the final approval is still pending, and Hinduja stated that it depends on the regulator’s timeline.

What is the current situation regarding the promoter’s pledged shares and margin calls?

Hinduja confirmed that, despite the recent drop in stock price, there have been no margin calls on the pledged shares. He clarified that the shares are pledged for short-term funding and that the promoters’ financial situation remains strong.