GIC raises stake in Band­han Bank to 10%

Black­rock in group buy­ing Us$1.4bil of In­dia bank shares

The Star Malaysia - StarBiz - - Foreign News -

MUM­BAI: Black­rock Inc and Sin­ga­pore’s GIC Pte bought shares in Band­han Bank Ltd as the main share­holder of In­dia’s most prof­itable bank sold 106 bil­lion ru­pees (Us$1.4bil) of its stake to meet the reg­u­la­tor’s own­er­ship rules.

Te­masek Hold­ings Pte and SBI Mu­tual Fund also bought shares, the bank’s founder and chief ex­ec­u­tive of­fi­cer Chan­dra Shekhar Ghosh said in an in­ter­view on Mon­day. GIC got the Re­serve Bank of In­dia’s ap­proval to raise its stake in the lender to 10% from 4.9%, he said.

Band­han Fi­nan­cial Hold­ings Ltd sold 337.4 mil­lion shares in the In­dian lender at 313.1 ru­pees in a block trade on Mon­day, low­er­ing its stake to 40%. The sale took place at a 9.3% dis­count to the pre­vi­ous clos­ing price, ac­cord­ing to deal terms seen by Bloomberg News.

Band­han Bank’s shares plunged 10.5% in Mum­bai on Mon­day af­ter the trans­ac­tion, its big­gest loss since March 30. They were up as much as 2% yes­ter­day.

The cen­tral bank had re­stricted branch ex­pan­sion by Band­han Bank, which spe­cialises in lend­ing to small bor­row­ers, af­ter the found­ing firm failed to lower its stake to the target 40% last year. Band­han Bank then agreed to com­bine with mort­gage fi­nancier Gruh Finance Ltd in a Us$11.7bil deal to pare the founder’s stake as man­dated, fol­low­ing which the cen­tral bank par­tially re­laxed its curbs on the lender.

“RBI is very clear that share­hold­ing in pri­vate banks should be di­ver­si­fied as it re­duces con­cen­tra­tion risk,” said Karthik Srini­vasan, group head for fi­nan­cial sec­tor rat­ings at ICRA Ltd, the lo­cal arm of Moody’s In­vestors Ser­vice. “The ur­gency of stake sale by Band­han founders shows that RBI is on track on its rules re­gard­ing share­hold­ing in pri­vate banks.”

Af­ter the lat­est sale, Band­han Fi­nan­cial will need to lower its stake in the bank to 20% by Au­gust 2023, Ghosh said, cit­ing RBI rules. He said his per­sonal stake in the hold­ing com­pany is 2%, with the rest held by GIC, In­ter­na­tional Finance Corp and oth­ers.

The hold­ing com­pany aims to use the pro­ceeds to start new ven­tures in ar­eas such as in­sur­ance and as­set man­age­ment, sub­ject to RBI’S ap­proval, Ghosh said.

The cen­tral bank is cur­rently re­view­ing its norms on share­hold­ing in pri­vate banks, which stip­u­late founders cut their stake to 15% even­tu­ally, as part of its ef­forts to im­prove cor­po­rate gov­er­nance.

Some of Band­han Bank’s prof­itabil­ity met­rics, in­clud­ing re­turn on as­sets and re­turn on eq­uity, are the high­est among In­dian banks.

Credit Suisse Se­cu­ri­ties (In­dia) Pvt, Jp­mor­gan In­dia Pvt, Gold­man Sachs (In­dia) Se­cu­ri­ties Pvt and JM Fi­nan­cial In­sti­tu­tional Se­cu­ri­ties Ltd are joint bookrun­ners for the deal. — Bloomberg

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