IndusInd Bank's stock drop below Rs 600 may require Hindujas to pledge more, warns Macquarie

Hinduja Group, which promotes IndusInd Bank, may be compelled to pledge up to 80% of its holdings in the bank if the stock price drops below Rs 600 per share, according to an analysis by Macquarie Capital.

Analysts warn that the risk of pledging could extend to other Hinduja-led entities as the group works to repay debt and reduce collateral. IndusInd International Holdings (IIHL), led by the Hinduja Group and owning a 15% stake in the bank, has already pledged about 50% of its shares to Barclays Bank PLC and Deutsche Bank AG in exchange for a loan.

“At the current market price, the promoter stake is approaching critical levels. At Rs 600, nearly 80% of the promoter's shareholding will need to be pledged to maintain the same value of pledged shares as of December 22, when they last topped up,” said Anjali Sinha, Head of India Equity Sales, in a note. “We are uncertain about the specifics of the contract between the promoters and lenders. If there are any thresholds that require an increase in the coverage ratio, it could pose a problem.”

Sinha also raised concerns about the impact on the Hinduja Group's ability to repay debt and reduce the pledged percentage, especially considering their borrowing to delist Reliance Capital. She questioned whether there might be risks for other Hinduja-led entities, such as Ashok Leyland, where promoters hold about 50% of the stake, with 30% of it pledged.

As of December 20, 2024, when the stock was valued at Rs 930 per share, the pledged stake was worth approximately Rs 5,500