MSCI indice-rating of HDFC inaccurate: Keki Mistry

Shares in HDFC fell 3.7% after MSCI (Morgan Stanley Capital International) reduced HDFC's weightage in its indices. MSCI reduced the weightage of HDFC in its indexes to accommodate new addition and deletions, as part of its semi-annual review of the composition across all country indices.

Keki Mistry, vice-chairman and CEO, HDFC clarifies to CNBC-TV18 that the cut in rating is inaccurate and plans to talk to MSCI about reversing the cut.

Below is an edited transcript of the interview to CNBC-TV18. Also watch the accompanying video.

Q: Have you written to MSCI to clarify the calculation or tabulation of FII ownership at much higher levels and therefore HDFC's weightage does not deserve to be cut down by as much as it has?

A: We have not yet written to them, because we are trying to figure out the right person to talk to.

But according to our understanding, Morgan Stanley has looked at HDFC’s foreign ownership cap at 74% which is not correct, because our foreign ownership cap, in reality, could be 100%.

There is no capping or reversal on foreign ownership as far as HDFC is concerned.

In 1995 HDFC had a private placement of shares through which more than USD 50 million was brought into India from overseas. And as the RBI's rules do not apply, HDFC's cap could be 100%.

So that's something we want to clarify to MSCI, but we want to first talk to them and understand why our weightage was reduced.

Q: Where does the bank's FII holdings stand currently and where is the FDI limit?

A: The total FII, shareholding, between FDIs and FIIs, is about 71%.

Q: So according to your calculation foreign holdings could go up to 100%?

A: This is FII plus FDI, not just FII.

Q: So if foreign holdings can go up to 100%, do you think the weightage in reduction should be up on the index?

A: Frankly, I have no idea how this calculation is done, so I wouldn't be able to comment. But logically it should go back to where it used to be.