RBI, the central bank of India has approved Life Insurance Corporation (LIC) to increase its stake in the IndusInd Bank up to 9.99%. In a regulatory exchange filing on Friday, IndusInd Bank said, "We are pleased to inform you that the Bank has received an intimation from the RBI on December 9, 2021, that it has granted its approval to Life Insurance Corporation (LIC) to acquire up to 9.99% of the total issued and paid-up capital of the bank." At present, LIC holds a 4.59% stake in the IndusInd Bank.
In the last week, LIC was allowed to raise its stake in the Private lender, Kotak Mahindra Bank up to 9.99%. LIC earlier held 4.96% in Kotak Bank.
According to an available report, the approval of stake increase in the IndusInd Bank will be valid for one year, till December 8, 2022, Mint, an English daily reported. If the investment takes place, it will be subject to compliance with the Master Direction on 'Prior Approval for Acquisition of Shares or Voting Rights in Private Sector Banks', Master Direction on 'Ownership in Private Sector Banks', regulations of the SEBI, the Foreign Exchange Management Act, 1999 and any other guidelines/regulations and other applicable, existing laws in the country.
IndusInd Bank's promoters got approved to have a shareholding in the bank to up to 26% from the previous 15%, according to RBI rules.
In the morning today, after the publication of the news of LIC's stake raise, in NSE, the bank's share price increased to Rs. 959.30/ share, however, again fell to Rs. 940.45/share at 1.22 pm, on Dec 10. Ahead of LIC IPO listing, the stake increase in the private banks by LIC will boost investors' confidence in the corporation's stocks.
Renowned brokerage firm Sharekhan is confident about the bank's stock, as it mentioned in a report, "The bank continued its Digital 2.0 strategy and the Q2 witnessed launch of new initiatives. The management is confident of clocking a 16-18 percent loan growth as the COVID-19 scenario normalises." With an estimated 40% upside from the current market price (CMP), the report added, "The stock trades at 1.4x/1.3x/1.1x its FY2022E/FY2023E/FY2024 book value, which is reasonable. We maintain a 'buy' on the stock with an unchanged price target of Rs. 1,340 per share."