12-Oct-2023
2 mins read
Recently, the Reserve Bank of India (RBI) approved the SBI Mutual Fund’s (SBI MF) proposal to purchase a 9.99 per cent share in the well-known private-sector bank, IndusInd Bank. This decision, made public on October 11, followed an application by SBI MF to the RBI, requesting permission for this significant acquisition.
Implications for Voting Rights
This acquisition isn’t just about share capital. It’s also about influence. With the acquisition, SBI MF will be entitled to 9.99 per cent voting rights in IndusInd Bank. Such a significant share implies a notable influence on the bank’s decision-making process and overall direction.
Timeline and Boundaries
While the approval is certainly exciting news, it comes with certain guidelines. The RBI has mandated that SBI MF completes this acquisition within a year, setting the deadline for October 10, 2024. Furthermore, the central bank has stressed that the aggregate holding by SBI MF in IndusInd Bank should not go beyond the approved 9.99 per cent, be it in terms of paid-up share capital or voting rights.
Previous Approvals
This isn’t the first time RBI has given its nod for significant acquisitions by entities related to the State Bank of India. Back in May, SBI Funds Management (SBIFML), which is a collaboration between the State Bank of India and France’s AMUNDI, received RBI’s approval to acquire a similar 9.99 per cent stake in HDFC Bank. The recommended timeframe for that acquisition was a tighter window of six months.
IndusInd Bank’s Financial Health
IndusInd Bank has been registering impressive financial outcomes. The bank reported a net profit of Rs 2,124 crore in the first quarter of fiscal 2023-24. It marked a 32% increase from Rs 1,603.29 crore during the June 2022 quarter. Along with this, the bank’s net interest income rose by 17.98%, reaching Rs 4,867.11 crore, up from Rs 4,125.20 crore in the same quarter of the previous year.
Market Reaction
Following the announcement, IndusInd Bank’s shares experienced a slight dip. The Bank marked a 1.95 per cent decrease from the previous trading day on October 11.
With this acquisition, the financial landscape is set for interesting developments in the coming months. As SBI MF gears up to solidify its position within IndusInd Bank, market watchers and stakeholders will keenly observe the unfolding dynamics.