US hedge fund Route One gets RBI nod to double IndusInd stake to 10%

Mumbai: US-based hedge fund Route One Investment Company is set to double its stake in IndusInd Bank to 10% and has already got the Reserve Bank of India’s approval, the Hindujas-owned private bank said in an exchange filing on Friday.

Route One, which already holds 4.96% in the private lender, could invest more than 1,800 crore to purchase the additional stake, market experts told ET.

IndusInd Bank shares closed almost 2% up at Rs 521.85 on the National Stock Exchange on Friday.


“RBI has forwarded the bank a copy of the letter addressed to ROIC, granting approval for increasing their shareholding up to 10% of the paid-up voting equity capital of IndusInd Bank Limited,” the Pune-based bank said in an exchange filing. As per RBI rules, investors need prior approval from the regulator to buy more than 5% stake in a bank.

IndusInd board of directors in a July 5 meeting had granted approval to the proposed acquisition by Route One.

IndusInd Bank promoters, the Hinduja brothers, had also approached the RBI, a couple of months ago to hike stake in IndusInd Bank to 26%. That matter was put on hold by the regulator as it has formulated a committee to review and suggest necessary changes to private bank shareholding norms.

Subsequently, the brothers decided to raise their stake in the lender within the regulatory limit of 15%. Later they had purchased at least 1.9 million shares from the open market.

The stock has lost nearly 60% in value in the last six months.

High provisioning requirements had forced IndusInd Bank’s profit down by about 16% at the end of March. The bank is well capitalised with tier 1 capital of 15% and capital adequacy ratio of 15.43%.

Last month, global ratings firm Moody’s Investors Service had downgraded the bank’s long-term local and foreign currency deposit ratings to Ba1 from Baa3. It had also kept the rating outlook negative, raising concerns over the lender’s weak funding mix, reflected by its high deposit concentration and a low share of retail deposits. Moody’s had commented that the ratings reflected the risks to the bank’s asset quality and profitability amid the deteriorating macro environment.