People’s Bank of China (PBOC)—the central bank of the world’s second largest economy— is quietly building its India portfolio even as the geo-political relationship between India and China have remained turbulent.
According to data compiled by Moneycontrol from various filings from Ministry of Corporate Affairs(MCA), PBOC held shares in at least 35 Indian companies amounting to a portfolio value of about Rs 40,000 crore at the end of FY24.
ICICI Bank is the top India bet of PBOC in terms of market value as the central bank owns shares worth Rs 6,139 crore in the private lender. PBOC owns shares worth Rs 5,344 crore in HDFC Bank, while it owns shares worth Rs 5,303 crore in Infosys, data showed. PBOC also held shares worth Rs 1,414 crore in Indian government-promoted Power Grid Corporation.
The development assumes significance as PBOC’s name featured for the first time in the shareholding pattern of erstwhile HDFC (now merged into HDFC Bank) in 2020 at the height of the pandemic, leading to concerns about Chinese investments into India. This eventually led to the central government issuing ‘Press Note 3’. The note made Indian government's approval mandatory for all Chinese investors who seek to make investments into India unlisted companies.
While, there is no restriction on Chinese investments into listed companies, market regulator Securities and Exchange Board of India (Sebi), in the past, had expressed concerns about potential misuse of the foreign portfolio investor (FPI) route by Chinese investors to circumvent Press Note 3 restrictions.
Top India bets of PBOC
PBOC owns shares worth Rs 3,619 crore in software company TCS. Kotak Mahindra Bank, Hindustan Unilever and Bajaj Finance are other top bets of PBOC where the market value of the investment is more than Rs 1,500 crore. Additionally, the Chinese central bank owned shares worth over Rs 1,100 crore in Maruti Suzuki, Tata Motors and Ultratech Cement. Bajaj Finserv, Tata Motors and Asian Paints, and Paytm’s parent One97 Communications are amongst the other top bets of PBOC in India, data showed.
PBOC’s first investment into ICICI Bank was a Rs 15 crore purchase it made in the lender in 2020 during a qualified institutional placement, according to various media reports. Since then, PBOC has increased its exposure to the bank and currently owns 0.67% in ICICI Bank.
According to the data, the Chinese central bank doesn’t own more than 1% in any of its India portfolio companies. Sebi disclosure rules mandate all listed companies to disclose name of all shareholders owning more than 1% equity.
However, while filing annual returns with MCA, companies are required to file a form named MGT-7, which mandates disclosure of all major foreign investors in the company. The deadline for companies to file this form is November 30 every year.
Sebi's concerns on misuse of FPI route by Chinese investors
In a circular dated August 24,2023 Sebi made it mandatory for certain FPIs to disclose granular details of their beneficial owners. In the circular, Sebi has cited potential misuse of FPI route by Chinese investors.
“While PN3 is not applicable to FPI investments, there are concerns that entities with large Indian equity portfolios could potentially disrupt the orderly functioning of Indian securities markets by misusing the FPI route” the circular said.
Further, Sebi issued a discussion paper on July 30,2024 proposing to introduce a framework where FPIs will be marked based on percentage of investors originating from China into FPIs. It said, FPIs having over 50% of their investors from China to be marked as LBC entities (Land Bordering Country entities). No final rules have been yet issued on the same.
Currently, there are 17 FPIs registered as originating from China including China government owned Best Investment Corporation and Asian Infrastructure Investment Bank, NSDL data showed. Best Investment Corporation is owned by China’s sovereign wealth fund China Investment Corporation(CIC) that manages $870 billion worth assets worldwide. However, Best Investment Corporation owns only shares worth Rs 800 crore in India in companies such as Infosys and Power Grid, data showed.
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