IndusInd Bank today has approved the amalgamation of its holding company IndusInd Enterprises & Finance (IEFL) with itself. The share swap ratio of the bank has been fixed at 1:1.
The share swap ratio was based on the recommendation of SBI Capital Markets and A F Ferguson & Co who were retained by IndusInd Bank and IEFL, respectively.
IEFL which had a stake of 31.25 per cent in the bank, brought it down to 24.86 per cent through sale in the open market in March 2002. Hindujas currently hold 49.86 per cent stake in the bank.
Also Read
Indusind International Holdings Ltd (IIHL), a Mauritius-based company, along with its subsidiaries hold a 25 per cent stake in the company, while 51 per cent of IEFL is held by IIHL.
With this merger, the promoter's stake in the bank will come down to around 41.32 per cent. According to the new Reserve Bank of India guidelines, promoters shareholding in a new private bank can be kept at 49 per cent.
This is the second time that the bank has announced this merger. In 2001 too, the boards of IndusInd Bank and IEFL had approved the merger of IEFL with the bank. At that time the date of the merger had been set at March 31, 2001 with the share swap ratio fixed at the same current swap of 1:1. SBI Capital Markets Ltd was the advisor for both the parties.
The Reserve Bank of India (RBI) had vetoed the bank's merger proposal with IEFL saying that merger could not be used as a vehicle of diluting the promoter shareholding in the bank.
The appointed date for the merger this time is proposed to be April 1, 2002. The scheme will come into affect after filing of High Court Order with the Registrar of Companies and is subject to RBI and other approvals.
IndusInd Bank's managing director Bhaskar Ghose said, "IEFL had become a shell company. The company has major shareholding in two of the Hinduja Group company including IndusInd Media and Communication.. The major activity of the NBFC was trading in shares. The bank will also save rental charges of around Rs 6.75 crore per annum as the corporate office building is owned by IEFL. One of the major income of IEFL was the dividend of the bank in which the shareholders were now taxed twice. The shareholders of IEFL will also get an exit route as IEFL was not listed."
He also added that as far as the bank was concerned the equity base of the bank would rise by Rs 60 crore to Rs 220 crore, while the net worth of the bank would rise from Rs 558 crore to Rs 618 crore as on March 31, 2002.
The capital adequacy ratio of the bank will also increase to 14.06 per cent as on March 31, 2002, as against 12.51 per cent on the same date.
IEFL is a non banking finance company (NBFC) with a paid-up capital of Rs 100 crore and 39,000 shareholders. The net worth of the company is Rs 120 crore and it is debt free company.