IndusInd Bank Puts Rs 1,573 Crore Worth Microfinance Loans On The Block
IndusInd Bank’s microfinance loan sale represents a significant portion of its bad loan portfolio, with stress identified in regions like Bihar, Maharashtra, and Odisha.
Private sector lender IndusInd Bank is looking to sell over 10 lakh microfinance bad loans worth Rs 1,573 crore through an auction process. According to a sale notice listed on the bank's website, it will conduct the sale through an auction.
The bank has invited bids from potential buyers for sale on a 100% cash basis on an “as is where is”, “as is what is”, and “whatever there is” basis. Since microfinance loans are unsecured in nature, there are no details of available security against these loan accounts.
According to details released by the bank previously, the portfolio on sale represents 4.8% of the bank's outstanding microfinance book of Rs 32,723 crore, as of September 30. IndusInd Bank had reported outstanding microfinance bad loans worth Rs 2,259 crore. At the end of the second quarter, overall gross non-performing assets for the bank stood at Rs 7,639 crore.
IndusInd Bank has set a reserve price of Rs 85 crore for the purposes of this auction. That would indicate that the reserve price for these loans is set at a little over 5% of the principal outstanding in these assets. The lender had sought intimation from interested parties by December 30.
"Most MFI businesses have a recovery of around 7% to 15% depending on the DPD (days past due) stage. So, early stages will have about 15% to 20% One year older cases will have about 5% to 7%," IndusInd Bank MD & CEO Sumant Kathpalia told analysts over a conference after the second quarter results.
Like most private lenders in India, the bank has reported higher slippages in its microfinance portfolio, as certain states have seen higher rates of default. There is stress emerging in some parts of the country, specifically Bihar, Maharashtra, Odisha, and parts of North India. Kathpalia told analysts.
"We like this business. We believe that this business will turn around once the disbursements growth resumes. And because we don't give disbursements to clients who are delinquent," he said, adding that the bank expects slippages to stabilise in two months.
IndusInd Bank has also seen defaults in its credit card portfolio in the July-September quarter.
IndusInd Bank's stock rose as much as 1.04% during the day to Rs 945 apiece on the NSE. The stock closed 0.36% lower at Rs 931.95 per share. This compares with a 0.10% advance in the benchmark Nifty 50. It has fallen 40.67% in the last 12 months and 41.71% year-to-date.
Out of 50 analysts tracking the company, 37 maintain a 'buy' rating, 11 recommend a 'hold,' and two suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 54.7%.
