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Despite IL&FS woes, IndusInd to go ahead with ISSL buy

The indicative three month time period for completion of the proposed acquisition ends this month

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Despite financial crunch and recent irregularities in debt servicing affecting Infrastructure Leasing & Financial Services's (IL&FS) image, IndusInd Bank is keen on moving ahead with its proposed IL&FS Securities acquisition.

On June 26, the bank had signed a definitive share purchase agreement to acquire 100% of IL&FS Securities Services Ltd (ISSL), an IL&FS subsidiary specialising in the capital markets business. The indicative three month time period for completion of the proposed acquisition ends this month.

"We have received RBI (Reserve Bank of India) approval for the acquisition. We still await certain additional regulatory approvals. Once they are received, the transaction closure can be expected immediately," IndusInd Bank told DNA Money.

When asked about fiasco surrounding the IL&FS group, the bank said ISSL is specialised and independent business activity involved in capital markets and not connected with infrastructure. "As of date, we expect our acquisition to proceed as per plan," the bank said.

ISSL, incorporated in 2007, reported a revenue of Rs 324.5 crore in the last financial year, down from Rs 342.65 crore in FY17. The firm's profit after tax in the same period stood at Rs 45 crore, down from Rs 51 crore a year ago. It is a leading capital market intermediary for professional clearing, depository and custodial services. ISSL is majorly owned by IL&FS and has some minority shareholders.

IndusInd Bank has not disclosed the deal value but has only shared that it would be a cash transaction. The acquisition was first announced on March 14 last year but has not been completed so far.

Besides RBI's approval, the other regulatory nods have not yet come due to which the transaction has not been completed. ISSL has over 1,000 broker client accounts, foreign portfolio investors and foreign institutional investors and completes three million transactions every day on the stock exchanges.

Icra on September 17 downgraded IL&FS Group's borrowing programmes, saying that the rating revision takes into account the recent irregularities in debt servicing by the company.

"The liquidity position at a group levels remains under challenge given the delays in raising funds from the promoters in accordance with the earlier stated plans, deterioration in the credit profile of key investee companies and sizeable debt repayment obligations. The company had planned to raise Rs 4,500 crore equity (through rights issue) and Rs 3,500 crore long-term line of credit from its shareholders. These plans, however, are yet to be finalised," Icra said.

...& ANALYSIS

  • On June 26, the bank had signed a definitive share purchase agreement to acquire 100% of IL&FS Securities Services Ltd (ISSL), an IL&FS subsidiary specialising in the capital markets business
     
  • The indicative three month time period for completion of the proposed acquisition ends this month

THE FINANCIALS

Rs 324.5 cr 
Revenue reported by ISSL in the last financial year

Rs 45 cr 
Is the firm’s profit after tax in the same period

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