Did not defer capital raising due to fear around AT1 bonds, says IndusInd Bank’s Romesh Sobti

IndusInd Bank has deferred its plan to raise funds through additional tier-1 bonds after a write-down in the AT1 bonds of Yes Bank under the restructuring plan. The bank's board meeting that was scheduled for later today has also been deferred.

Speaking about this latest developments, Romesh Sobti, MD & CEO of the bank said, "Our capital adequacy is well beyond 15 percent and another 1 percent to come in from the residual preference share, which the promoters have committed as consequence of Bharat Financial Inclusion merger."

“It’s not that we need capital. We have got enough fuel in the tank for the next 2 years for loan growth etc. It’s just that the board feels comfortable at a certain threshold and whenever we are near that threshold we do some sort of a top-up and that’s why this proposal came up about 10-15 days ago and we thought we will work this out and then this whole thing about Yes Bank happened,” added Sobti.

He further said that they did not defer capital raising due to fear around AT1 bonds. “We just thought that there is a lot of dust flying around and we don’t need the capital. So let’s defer till another day. We are still above the threshold where the board is comfortable,” he further added.

According to him, the last word is not yet out on the fate of AT1 bonds. So, we will have to see the fine print on the final resolution plan  before we come to any conclusion, he said.

Speaking further about the restructuring plans, Sobti said, “The restructuring rotates around equity. I would think that probably that is one way of compensating the AT1 holders and equity is coming at a very attractive price today. So, that would be a good way of making sure that the existing holders don’t get affected. Secondly, AT1 as means of taking recourse to buttress your capital doesn’t vanish. So there could be a way out through equity route as part of the restructuring.”

“Most of the investors would agree because it’s an attractive investment at this point of time at this valuation and given the new holding structure, I would say it’s an attractive proposition and attractive investment,” Sobti added.

When asked about Yes Bank fiasco, he said, “The moratorium is standard process that happens whenever this sort of a restructuring takes place or a merger takes place and our indications are that it is going to be lifted sooner than later in 30 period that came in.”

“People should now see the end of uncertainty relating to that (Yes Bank) particular bank. For last one and a half year there was uncertainty whether money will come in or not come in and there was more comfort then. I should think there should be more comfort now that it’s clear that the resolution plan is very firm, who takes what is also getting cleared. We are seeing huge amount of interest as an attractive investment destination. So, it should actually calm the market rather than the other way round that we are seeing,” he added.

When asked how their depositors have behaved since the Yes Bank moratorium was announced, he said, "Our deposit figures have shot up since announcement of Yes Bank moratorium. Actually, we are carrying huge amount of excess liquidity."

When asked if they would interested in buying 5 percent stake in Yes Bank if they were approached by SBI, since the state bank was looking for a strong global an local investors for Yes Bank, Sobti said, " I told you it is a very attractive proposition."