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Reserve Bank of India on Thursday gave approval to Life Insurance Corporation of India to acquire up to 9.99% stake in HDFC Bank Ltd, said the bank in a stock exchange filing.
“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. Further, LIC must ensure that the aggregate holding in the Bank does not exceed 9.99% of the paid-up share capital or voting rights of the Bank at all times,” said HDFC Bank.
“The approval has been granted with reference to the application made by LIC to RBI. The approval granted by RBI is subject to the conditions mentioned therein including compliance with the relevant provisions of the Banking Regulation Act, 1949, RBI’s Master Direction and Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies dated January 16, 2023 (as amended from time to time), provisions of the Foreign Exchange Management Act, 1999, provisions of the regulations issued by Securities and Exchange Board of India, and any other guidelines, regulations and statutes as applicable,” said HDFC Bank in the regulatory filing.
The development will be seen as a positive by HDFC Bank shareholders as the Mumbai-based lender’s stock has hit a new 52-week low earlier this month in the wake of tepid third quarter results and selling by Foreign Portfolio Investors. On Thursday, HDFC Bank’s scrip on BSE closed trading 1.4% lower at Rs 1,435.3.
At 1050 am EST, the lender’s ADR on New York Stock Exchange was trading 1.8% higher at $55.8.
While HDFC Bank’s standalone net profit for the third fiscal quarter beat analyst estimates, its core net interest margin (NIM) on total assets fell to 3.4% from 3.65% in the previous quarter.
Those margins were above 4% for the bank before it merged with HDFC in July last year.
HDFC’s higher borrowing costs and a lower-yielding loan book have weighed on the merged entity’s margins in the two quarters it reported results after the merger.
Brokerage Jefferies said margins were a “key miss” and that higher retail deposit mobilisation and lending will be key to lifting NIMs.
With inputs from Reuters
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