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IndusInd to further reduce exposure to Anil Ambani's embattled Reliance group

MUMBAI: IndusInd Bank’s September quarter profits grew 50 percent as the lender exploited the opportunity to raise lending to the automobile sector when rivals pulled back due to industry slowdown, but at the same time it reduced exposure to financially weak business groups including Anil Ambani’s Reliance entities.

Chief Executive Romesh Sobti dismissed the vulnerability of the lender’s exposure to risky business families such as Subhash Chandra of Zee as `misinformation’ and said its combined exposure to these troubled business families was less than 2 percent.

``While the market talks about these stressed accounts they were never stressed in our book, there was no overdue and not close to becoming a non-performing asset. There is complete misinformation and misread on our exposure towards another housing finance company, where we have stated that the exposure is 0.35% (of the loan book) and that has now fallen to 0.27%. Conjectures continue but we have steady flow of repayments,” said Sobti.

But the stock plunged 6.2 percent to Rs. 1,228.95 as the gross bad loans more than doubled to Rs. to Rs.4370 crores or 2.19 percent of the loan book in the quarter, from Rs.1781 crore or 1.1 percent last year.

“Since the March we have reduced the exposure to these companies from 1.9 percent to the current 1.1 percent,” said Sobti, adding that the bank is in process of further bringing down the exposure to 0.8 percent through the sale of stake held in Reliance group. “Consolidated security cover of 160% for the exposures held by us, of which marketable security in the form listed shares covers 37% of the total exposure as on date. Total exposure expected to reduce to 0.8% by the end of October 2019 through repayments.”

IndusInd Bank has been at the receiving end of speculators with it losing about a fifth of its market value on speculation that it is exposed to financially wobbly business houses such as Anil Ambani’s Reliance Group, Indiabulls Housing, Zee Telefilms and Dewan Housing Finance.

The private sector lender said that it had a combined exposure to three debt-laden companies: Zee, DHFL and Anil Ambani led Reliance of about Rs.2100 crore or 1.1 percent of the loan book.

Separately, the lender made Rs.737 crores worth of accelerated provisions in the quarter, which is 25 percent more than what they made in the same quarter last year, aided by the center’s corporate tax cut in a bid to strengthen their balance sheet. These provisions helped the bank’s provision coverage ratio (PCR) improve to 50 percent from 43 percent in the last quarter, with a target to reach 60 percent by the end of the fiscal.

Its performance continued to be robust as it stepped on the gas when others pulled back from lending to automobile purchases. Earnings rose to Rs. 1,400 crore from Rs.920 crore a year earlier driven by retail loans growth in the corresponding quarter last year led by strong margins growth and gains from fee income.

“Our commercial vehicle grew 14 percent, utility vehicle loans grew by 25 percent, two-wheelers by 14 percent and tractors by 34 percent,’’ said Sobti. ``The growth in this portfolio has been pretty secular despite the ongoing slowdown. We can attribute this to the fact that competitors in this segment have withdrawn their financing giving us more space for capturing demand.” The veteran banker pegged the sector to see partial revival by the fourth quarter of the ongoing year calling the slowdown more cyclical than structural.

Sobti, who is set to retire by the end of the ongoing fiscal didn’t divulge on the topic of his potential successor, even as news reports this week had pegged the head of consumer Sumant Kathpalia as the frontrunner to bag the top job. “It is a matter for the board to discuss,” said Sobti. “At the board has not made any submissions to the Reserve Bank of India.”
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