The Hindu Business Line : Acquisition rumour fuels IndusInd Bank

THE IndusInd Bank stock has been buzzing on unconfirmed market news over the bank's likely acquisition of Centurion Bank and a non-banking finance company.

Hectic buying on Wednesday took the stock to its 52-week high of Rs 32.10. At the end of the session, there were buyers at higher prices on the BSE. Over 20 lakh shares were traded on the NSE and BSE on Wednesday.

Talks of merger of a group company — Ashok Leyland Finance & Leasing — with IndusInd is also doing the rounds in market circles. The Hinduja-controlled bank had earlier indicated its openness towards acquisitions.

It had recently amalgamated IndusInd Enterprises and Finance, one of its promoters, with itself. Consequent to this amalgamation, the equity of the company expanded to Rs 219.40 crore. At present, Indian promoters hold 24.86 per cent and foreign promoters around 25 per cent, representing the total promoters' stake of 49.86 per cent.

According to Mr Gaurav Dua of Anagram Stockbroking, at Wednesday's closing price, the stock was at over three times its annualised earnings per share of Rs 9.2 in 2003-04.

During the second quarter, the bank saw a 200 per cent jump in net profit after registering a 135 per cent jump in the bottomline in the first quarter.

According to Mr Dua, the bank's higher cost of funds is somewhat of a growth restricting factor for the stock. IndusInd is dependent on FCNR (Foreign Currency Non-Resident) deposits on which interest rate is higher compared with domestic deposits. The main thrust of the bank is on fee-based income due to lack of a strong deposit base. Its network is restricted to urban areas only.

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