NEW DELHI: The government has cleared the HDFC Bank’s proposal to raise an additional share capital of Rs 24,000 crore from Foreign Direct Investment (FDI), thus allowing it to take its FDI cap to 74 per cent, which is the regulatory ceiling.
Currently, FDI in the country’s second largest bank stands at 72.62 per cent. “That (the infusion) will not result in a breach of the 74 per cent cap on overseas investors’ stake in the bank,” interim Finance Minister Piyush Goyal told reporters after a Cabinet meeting chaired by Prime Minister Narendra Modi on Wednesday.
Currently, foreign investments up to 49 per cent are allowed in Indian banks without regulatory approval, but increasing it to 74 per cent requires regulatory and government approval.
In December last year, HDFC Bank’s Board of Directors had approved a proposal to raise Rs 24,000 crore through a mix of instruments, which was aimed at improving the bank’s capital adequacy ratio and to expand its banking operations across the country.
As per the statutory requirement, HDFC Bank had sought approval for maintaining the permissible foreign holding in the bank up to 74 per cent of its total paid-up capital, out of which the Foreign Institutional Investors sub-limit would be 49 per cent and the balance 25 per cent would be FDI.
Of the additional Rs 24,000 crore, Rs 8,500 crore is proposed to be allotted to HDFC Ltd, the promoter, on a preferential basis.
In 2015, the government had allowed HDFC Bank to raise Rs 10,000 crore from foreign investors.
The bank had posted 20.3 per cent growth in its standalone net profit at Rs 4,799.3 crore for the March 2018 quarter. With rising bad loans in Public Sector Banks (PSB), private banks like HDFC Bank had attracted a large number of investors and had seen a steep rise in their valuation.
As on May 25, 2018, HDFC Bank’s market cap stood at Rs 5.22 lakh crore, almost double than that of the largest PSB State Bank of India at Rs 2.38 lakh crore.