News: ABN Amro eyes a slice of IndusInd

(TT 14/08/2006) Mumbai - ABN Amro Bank NV may pick up a stake of up to 5 per cent in IndusInd Bank.

Speculation on such a strategic stake sale is not new for IndusInd Bank. There have been rumours that Reliance Capital Ltd (RCL) and other foreign banks were interested in picking up a stake. The bank had denied these reports, even as it said a strategic partner may be inducted at an appropriate time.

However, it is now learnt that ABN Amro Bank may be close to picking up to 5 per cent stake in the bank. If banking circles are to be believed, the two entities have also started negotiations. Reserve Bank of India (RBI) regulations prohibit foreign banks that have operations in India from picking up more than 5 per cent stake in a local bank. However, the central bank has laid out a roadmap that will open the banking sector to acquisitions by foreign banks from 2009.

While the current RBI guidelines have prevented foreign banks from pursuing the inorganic route, HSBC has been forced to prune its holdings in UTI Bank to comply with these rules. However, Citigroup has acquired a stake in Housing Development Finance Corporation (HDFC) that gave it an indirect holding in HDFC Bank. Clearly, foreign banks are preparing for the future when the floodgates will be opened.

Sources close to both IndusInd Bank and ABN Amro Bank, however, denied that talks have been held between the two or that the foreign bank may pick up a stake in its Indian counterpart. “This is pure market speculation,” an official said.

However, the buzz is that a stake sale in IndusInd Bank may be made in the price range of Rs 45-60 per share. On Friday, the IndusInd Bank scrip closed at Rs 39.50 after opening at Rs 38.70 and rising to an intra-day high of Rs 41.25.

Interestingly, IndusInd Bank has been raising capital from the market to support its growth in advances. In March this year, it became the first private sector bank to issue upper tier II bonds. The management has subsequently indicated that the bank may come out with a bond issue in the form of a domestic placement or an overseas placement with NRIs and institutional investors.