After the runaway success of ICICI Bank and Corporation Bank issues, here comes yet another maiden public offering from the banking sector. IndusInd Bank Ltd (IBL) is, in compliance with the RBI licensing norms which warrants promoter groups of banking companies to dilute their stakes to 40 per cent, offering 4 crore shares of Rs 10 each at a premium of Rs 35.

The offer, aggregating Rs 180 crore, comes after the two previous equity dilution plans -- a preferential offer of equity shares and a rights offer -- were shelved. Apart from the statutory compliance factor, the public issue will augment the bank's net worth for meeting future capital adequacy requirements.

The bank has been promoted by IndusInd Enterprises & Finance Ltd and other corporate bodies. Established in 1994, the bank today has a network of 20 branches spread all over the country. To keep pace with the emerging banking practices, all its branches have been networked through VSATs. It's banking software, which is Y2K compliant, enables speedy forex transactions. IBL is also a category I merchant banker and one of the depository participants in NSDL.

In March this year, IBL was adjudged the largest private sector bank in terms of assets, deposits, advances and net profit. In fiscal 1997, deposit grew at 119 per cent YoY, while advances grew faster at 124 per cent. However, within a short span of four months (between March and July 1997), doubtful assets have grown from Rs 1.98 crore to a whopping Rs 25.91 crore. Also during the same period, net NPA to net advances has grown from 2.02 per cent to 2.13 per cent. This is despite the bank's denial that it had a large exposure to the CRB group.

In fiscal 1997, on a total income of Rs 491.17 crore, IBL's net profit was Rs 73.32 crore, a growth of 60.72 per cent over the previous fiscal. On an equity base of Rs 120 crore, the bank's earnings per share stood at Rs 6.11. At Rs 45 per share, the price-earning multiple works out to 7.36.

For fiscal 1998, the bank has projected a PATof Rs 103.38 crore on a income of Rs 731.56 crore. On an increased equity base of Rs 160 crore, this should give a EPS figure of Rs 6.46. However, given the current economic state, when every bank's bottomline is under stress due to decreasing income from advances and narrowing spreads, IBL would surely find it hard to meet the projections. As a result, shareholders are unlikely to see a substantial capital appreciation in the short to medium-term.

Post-issue, promoters' holding will stand at 63.6 per cent which would further be diluted in future. The shares are to be listed on NSE, BSE and Pune stock exchange. The applicants to the issue also have the option to seek allotment through the depository mode. Lead managed by SBI Capital Markets, JM Financials and others, the issue opens on November 25.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.