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HDFC Bank to make fresh go for raising FII bar

Tuesday, 22 July 2014 - 7:55am IST | Place: Mumbai | Agency: dna

Bank plans to expand equity by 5%; will have to revise proposal before FIPB to increase foreign shareholding

HDFC Bank, the country's second-largest bank by assets, will make a fresh application to the Foreign Investment Promotion Board (FIPB) for increasing its foreign shareholding in the wake of the bank trying to raise funds by expanding equity.

The bank's earlier proposal to increase foreign shareholding to 67.55% excluding promoter holding is still pending with FIPB. Now, with the bank raising another round of equity, it will have to revise the FIPB proposal.

Paresh Sukhthankar, deputy managing director, HDFC Bank, told analysts, "We will apply to the FIPB again on increasing the foreign shareholding as we are raising the equity by 5%. The equity is being raised to meet the regulatory requirements under Basel III and also for fuelling the growth in the balance sheet."

The bank has obtained shareholder approval to raise fresh equity.

At present, FIIs hold 33.93% stake in the bank. Further, foreign investors hold another 16.97% shares through American (ADRs) and global depositary receipts (GDRs). Other foreign institutions such as DB International (Asia) Ltd and Government of Singapore also hold stakes in the bank.

If the 22.56% of the promoter HDFC, majority owned by foreign investors, in the bank is considered 'foreign', then the total foreign holding in HDFC Bank crosses 70% and if the increased foreign shareholding is allowed it will exceed the 74% limit. As per the existing guidelines, foreign holding in a bank cannot exceed 74%. FDI, FII, NRI holding, ADR/GDR, convertible preference shares, foreign currency convertible bonds are treated as foreign investment under the FDI policy.

Investments by HDFC Ltd, which is 75.71% owned by FIIs, and associate companies in HDFC Bank were made before 2009, when the government came out with norms to calculate the level of foreign investment in companies.

For the quarter ended June 30, HDFC Bank reported a lower than estimated profit. The bank said its net profit rose 21% to Rs 2,233 crore during first quarter ended June 30 over the year-ago period due to higher provisions.

Provisions for the June quarter increased to Rs 483 crore from Rs 286 crore in the corresponding quarter a year ago. Net non-performing loans as a percentage of net advances was steady at 0.3%. Net interest margin fell to 4.4% from 4.6% a year earlier due fall in fee income.

The bank's total income was Rs 13,070.7 crore and net revenues (net interest income plus other income) were at Rs 7,022.2 crore. Core net revenues, excluding impact of bond gains, were at Rs 6,997.2 crore for the June quarter, an increase of 13.9% over the year-ago quarter. Interest earned increased by 16.1% year on year at Rs 11,220.1 crore.

Net interest income (interest earned less interest expended) for during the reporting quarter accounted for 74% of net revenues, and grew by 17% year on year to Rs 5,171.6 crore.

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