The Reserve Bank of India has allowed Life Insurance Corp. of India to acquire as much as 9.99 percent of HDFC Bank, the country's largest private lender told stock exchanges on January 25.
"LIC has been advised by RBI to acquire the aforesaid major shareholding in the Bank within a period of one year i.e. by January 24, 2025," HDFC Bank said in an exchange filing. "Further, LIC must ensure that the aggregate holding in the Bank does not exceed 9.99 percent of the paid-up share capital or voting rights of the Bank at all times," said HDFC Bank.
LIC owns a 5.19 percent stake in the bank, according to the lender's shareholding pattern as of December 31.
As per the bank's exchange notification, the RBI informed the decision to the LIC through a letter dated January 25, under which LIC can acquire an aggregate holding up to 9.99 percent of the paid-up share capital or voting rights of HDFC Bank Limited.
The announcement is likely to come as positive news to HDFC Bank's shareholders. Recently, HDFC Bank shares had witnessed heavy sell off pushing the shares to near 52-week lows, post the announcement of the bank's third quarter earnings. Some analysts speculate that the sell off is due to foreign investors panicking over a recent Sebi proposal concerning foreign portfolio investors.
However, earlier in the day the bank said that there was no evidence suggesting that the selling by foreign portfolio investors was related to the Securities and Exchange Board of India (Sebi) guidelines.
“No evidence to suggest any FPI selling is related to the Sebi circular. Understand that companies with no identifiable promoters won’t be impacted by the Sebi circular,” the bank told CNBC-TV18 a day after the channel reported, citing sources from the bank, that the stock was a victim of selloff due to the regulator's guidelines on beneficial owner disclosure.
“Sebi's understanding that BO disclosure rules not to be applied to companies with no identifiable promoter needs to be communicated in writing,” sources said earlier.
December quarter numbers
On January 25, HDFC Bank's shares closed at Rs 1435.30 apiece on the BSE, down 1.41 percent from the previous close, while the Benchmark equity index Sensex closed 0.51 percent down at 70,700.67 points.
HDFC Bank, on January 16, reported a net profit of Rs 16,372 crore for the October-December quarter of 2023-24, which marks a 33.5 percent jump from Rs 12,259 crore clocked a year ago.
The net profit, at Rs 16,372 crore, came almost in line with the market estimates of Rs 16,427 crore. The net interest income (NII) of Rs 28,470 crore, which increased by 23.9 percent as compared to Rs 22,990 crore reported in the corresponding quarter of the previous fiscal.
The bank's gross non-performing assets (NPA) stood at 1.26 percent, up from 1.23 percent last year. On the other hand, net NPA for the quarter stood at 0.31 percent compared to 0.33 percent last year. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank said that the bank has historically seen an improvement in its asset quality.
However, investors were not enthused by the numbers as reflected in the drop in share price in the subsequent days.
During the quarter, the bank's provisions rose to Rs 4,216 crore, up by 50 percent. Srinivasan said that the provision number include contingent provisions of around Rs 1,212 crore on account of investments in alternative investment funds.
Total advances of the bank jumped 62.4 percent to Rs 24.69 lakh crore. Domestic retail loans of the bank grew by 111 percent, commercial and rural loans of the bank grew by 31.4 percent and corporate and wholesale loans (excluding non-individual loans of HDFC Ltd. of approximately Rs 98,900 crore) grew by 11.2 percent.
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