IndusInd Bank to auction Rs 1,573 cr microfinance NPAs amid sector stress

This move comes amid ongoing stress in the microfinance (MFI) sector.

The bank plans to auction these microfinance non-performing assets (NPAs) through a public bidding process and has invited bids on a 100 percent cash basis.

The reserve price for the auction is set at Rs 85 crore, amounting to just over 5 percent of the loans' total principal value.

Bidders have until December 30 to submit their proposals.

The loans slated for sale represent 4.8 percent of IndusInd Bank’s microfinance portfolio, valued at Rs 32,723 crore as of September 30.

At the end of Q2FY25, the bank reported Rs 2,259 crore in bad loans from its microfinance segment, contributing to its total gross non-performing assets of Rs 7,639 crore.

The bank's microfinance challenges are expected to exert pressure on profitability in FY25, with a projected return on assets (RoA) remaining at around one percent.

This is likely to result in a significant reduction in earnings per share (EPS), according to brokerage analyses.

IndusInd Bank's stock performance has been weak since the release of its September quarter earnings, which revealed disappointing results.

For Q2FY25, the bank's consolidated net profit declined sharply by 39.5 percent year-on-year to Rs 1,331 crore.

Net interest income (NII), a critical measure of profitability, grew 5 percent year-on-year to Rs 5,347 crore during the July-September period, falling short of market expectations.

Provisions and contingencies surged by 87 percent year-on-year to Rs 1,820 crore, compared to Rs 974 crore in the same quarter last year, driven by stress in its microfinance loan book.