IndusInd Bank’s merger with Bharat Financial is the highlight of Q1FY20: Romesh Sobti, IndusInd Bank

Bharat Financial Inclusion Ltd (BFIL) merger with the IndusInd Bank has also been a major highlight of the quarter, says Romesh Sobti, Managing Director (MD) and Chief Executive Officer (CEO), IndusInd Bank. In an interview with Anil Singhvi, Managing Editor, Zee Business, Sobti said whenever there is a slowdown, the number of operators and financers fade away from the market and a handful like us are left to play. Edited Excerpts:

Q: IndusInd Bank has reported a 38 per cent year-on-year jump in consolidated profit for the June quarter. Tell us about the key driver of this growth?
A: This jump of 38% in PAT is backed by growth in fee income and interest income, which grew by 28% and 36% respectively. Bharat Financial Inclusion Ltd (BFIL) merger with the IndusInd Bank has also been a major highlight of the quarter and this result is a consolidated result of the two companies. We are one of those banks who discloses its SMA data every quarter, which has improved a lot. So, the all-round performance has been a good one and the benefits of a merger with Bharat Financials is also visible. 

Q: Lenders of IL&FS including IndusInd Bank could soon recover around Rs16,000 crore from amber companies in the IL&FS Group. How IndusInd bank will be benefitted from IL&FS recovery?
A: As far as IL&FS assets are concerned, then a whole process of bidding for few of its assets, which have been put out for sale, is open and I feel that the bids will open up by end of this month and a substantial part of the debt would be covered. And, those, who have financed in operating banks like other banks can hope handsome recoveries from it. 

Q: Promoters of IndusInd Bank are ready to subscribe to the warrants at a premium more than Rs1,700 at a time when several promoters are ready to reduce their stakes in other private sector banks. Do you think that this readiness of the promoters can boost the confidence of the investors?
A: Yes, it will boost the confidence of the investors. This merger has led to a shareholding dilution of the promoters and they have placed preferential capital at Rs1,709/share and we have received 25%, around Rs675 crore, at the premium. So, this signifies that the promoters are confident about the bank and this is good for the bank.

Q: Resignation of SR Batliboi & Co as the statutory auditor of IndusInd Bank has confused people. Kindly clarify from your end that the move follows the decision of the Reserve Bank of India and there are no issues with the bank?
A: There is no point for confusion in it. As you are aware, the Reserve Bank of India through a notification has said that SR Batliboi & Co (SRB) can’t carry out statutory audits in commercial banks with effect from April 1, 2019. And, this change has been carried out as per the directive from the central bank. Other banks where SRB was acting as statutory auditors have also changed their auditors. 

Q: Update us about the NPA profile of the bank and the areas that are under stress till date and also accounts that can be recovered shortly?
A: Our corporate loan book is very diversified. We don’t feel any stress in any sector. We have disclosed our SMA-2 sectoral data and you can’t find any sign of stress in it and we don’t have any overdue at our end. Undoubtedly, liquidity issues for NBFCs have been prevalent in the market but we haven’t seen anything in our portfolio which can tense us. When it comes to recoveries then we have our eyes only on IL&FS at present while other recoveries can be termed as business recoveries.  

Q: It is difficult to report 38% growth in net profit amid this difficult environment. While going through brokerage reports I found that CLSA has maintained a buy rating on IndusInd Bank with a target price of Rs2,160. Do you think that the bank will be able to maintain this growth picture?
A: There is a slight slowdown in the market and you have seen that credit growth of the industry has dropped 12% in this quarter. However, the components available in our books are growing well, for instance, there are talks are that there is a slowdown in vehicle finances but if you have a look on our books than you will find that there is 24% increase in vehicle finances and that is not limited in just one sector. We have grown by 20% in commercial vehicles, 28% in two-wheeler segment and 32% in the three-wheeler segment. Our estimates suggest that this growth is driven by market share. 

The number of operators and financers disappear from the market, at a time when there is a downturn in the market and banks like HDFC and ours are left and this is something that helped us in increasing our market share. This is a reason that our market share has increased despite there is a slowdown in the market.