Goldman Sachs bought IndusInd shares after the stock price nearly doubled in 13 trading sessions
IndusInd Bank’s share price has made a comeback to a high of ₹442 today after a 52-week low of ₹235.55.
- On April 15, Singapore’s
Goldman Sachslapped up around 4.1 million of IndusInd’s shares worth ₹176 crore.
- Earlier this month, Singapore-based UBS Principal Capital Asia also bought around 5.38 shares of IndusInd Bank.
- Kotak Institutional Equities forecasts that the bank is still a ‘work in progress’ given its negative price experience partially due to the impact of Coronavirus — and partially due to the Yes Bank event.
The deal amounts to around ₹176 crore with Goldman Sachs representing around 0.65% stake in the bank. Another banking firm based in Singapore — UBS Principal Capital Asia — bought around 5.38 million shares in IndusInd accounting for 0.85% stake, earlier this month on April 7.
In the last three trading days, IndusInd’s stock has recuperated around 12% of its value. Yesterday, it closed at ₹426 per share and today, it hit ₹442 — a 4% hike — before dipping back down to ₹431.80.
Including the gains made this week, IndusInd’s share price made a massive comeback from its 52-week low of ₹235.55 on March 20. According to management, the dip was partially due to the impact of Coronavirus and partially due to the Yes Bank event.
A lot of banking stocks were hit when the Reserve Bank of India (RBI) seized control of Yes Bank, and IndusInd was one of the worst-hit during the bank stock meltdown.
IndusInd is still a work-in-progress
Broking firm Kotak Institutional Equities forecasts that IndusInd is likely to see lower loan growth, lower margins, lower fees — especially in investment banking. Moreover, it might also have to set aside a large part of capital to make up bad loans in the form of higher provisions.
“The bank is still a work-in-progess given the negative price experience,” said a report by Kotak Institutional Equities dated March 31.
IndusInd Banks’ deposit base also shrunk by around 10-11% primarily due to two state governments accounting for two-thirds of the drawdown. “The outflow of government deposits has now started to stabilize and the bank is aiming to reduce its reliance on this segment for liabilities,” said the Kotak report.
That loss has been offset by borrowings like the refinancing of loan portfolios for longer duration funds at attractive rates from developmental finance institutions and others. However, lack of exposure in the retail sector remains a worrying indicator.
AdvertisementThe bank also has contingency plans in place in case there’s another bout of deposit withdrawals including a large re-financeable portfolio of microfinance, MSME loans and vehicle loans.
It expects the impact of Coronavirus to last around three months and economic recovery in the second half of the year after slow growth in the first quarter. But it is yet to be seen if the bank itself will be able to ride out its slowing margins.
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