RBI directs Leyland to cut IndusInd stake to 10%

The Reserve Bank of India (RBI) has directed Ashok Leyland, while approving the merger of Ashok Leyland Finance with IndusInd Bank, to bring down its stake in IndusInd Bank to 10 per cent within a year.

This directive is in conformity with the RBI guideline to cap corporate stake in private banks at 10 per cent. Post merger, Ashok Leyland will hold 15.27 per cent stake in the bank.

IndusInd Bank, managing director, Bhaskar Ghose, refused to comment on the issue but said the merger is in line with the bank's growth strategy. The combined balance-sheet will show considerable improvement in the quality of the bank's asset portfolio, a bank release said.

The central bank's approval for the merger of a NBFC with a private bank assumes significance in the light of the recent directive of the regulator that banks should obtain prior approval before initiating steps for amalgamation or merger of a NBFC with a bank.

The central bank in its approval letter has also stated that IndusInd International Holding (IIHL) or any individual shareholder or group company, which plan to pick up the residual 5.27 per cent stake, would have to seek RBI approval, sources said.

The central bank has reserved the right to independently value and assess the asset and liabilities of the NBFC. Post-merger, IndusInd Bank will have an authorised capital of Rs 300 crore and issued capital of Rs 290.7 crore.

The merged entity's asset base will be over Rs 15,000 crore (augmented by Rs 3,000 crore through the merger). The merger ratio is 9:4, which means an individual holding four shares of ALFL will be allotted nine shares of IndusInd Bank.

The shareholding will be split between the foreign promoters (31.30 per cent), public (31.74 per cent), foreign institutional investors (4.39 per cent), banks, financial institutions and insurance companies (1.20 per cent) non-resident Indians/overseas corporate bodies other than foreign promoters (5.03 per cent) and private corporate bodies (25.03 per cent), of which Ashok Leyland (the main promoter) will hold 15.27 per cent stake.