BackHDFC AMC gets RBI approval to raise stakes in five pvt banks
India’s third-largest asset manager was granted regulatory approval to raise stakes in Karur Vysya Bank Ltd, DCB Bank Ltd, Equitas Small Finance Bank Ltd, Federal Bank Ltd, and City Union Bank
PremiumMUMBAI : HDFC Asset Management Co. Ltd, or HDFC AMC, has secured the Reserve Bank of India’s (RBI’s) approval to raise its stake to 9.5% in five private lenders, signalling growing investor interest in private lenders and a potential bullish trend.
India’s third-largest asset manager was granted regulatory approval to raise stakes in Karur Vysya Bank Ltd, DCB Bank Ltd, Equitas Small Finance Bank Ltd, Federal Bank Ltd, and City Union Bank, the lenders said in separate exchange fillings.
“Taking RBI permission is part of a well-followed procedure by bank-sponsored AMCs and others before crossing the 5% shareholding mark, as getting approval is a time-consuming affair," an HDFC AMC official said on condition of anonymity. “If the banks concerned come up with a QIP (qualified institutional placement) or a block deal, it is not possible to acquire more. That said, getting permission doesn’t automatically imply that we will increase our existing stake," the official said.
At Thursday’s closing prices, a 9.5% stake in each of the five banks will cost a total of ₹6,461 crore.
Sustained credit growth and improving profitability have made bank stocks an attractive investment option for fund managers amid robust inflows into mutual funds.
Over the past three months, Karur Vysya Bank has gained 9.23%, DCB Bank 6.28%, City Union 3.4%, and Federal Bank 18.1%. Equitas Small Finance is an exception, with a loss of 2.1% over the past three months.
Ajay Bodke, director of Padigree Advisory Pvt. Ltd, said considering the pace of growth in assets under management (AUM), mutual funds (MFs) need more headroom to add to their exposure. “And, the banking sector having the highest weight is looked at favourably."
HDFC AMC already owns stakes in the five lenders.
For HDFC MF, which managed average assets of over ₹4.58 trillion in the June quarter, the stake acquisitions can be done through separate equity-oriented schemes since they will be bound by the MF exposure norms stipulated by the Securities and Exchange Board of India (Sebi).
Sebi’s MF norms restrict a single scheme from investing more than 10% of its assets in one publicly traded company and limit the total exposure to a single sector to 25% of its net asset value (NAV).
To be sure, RBI has only given a go-ahead to HDFC AMC for the stake acquisitions within a year. It may not result in an actual hike in stake.
As of 30 June, HDFC Trustee Co. Ltd (through various schemes) held a 4.49% stake in Karur Vysya Bank, while HDFC Small Cap Fund held a 4.47% stake in DCB Bank Ltd. Further, HDFC MF holds a 4.68% stake in Equitas Small Finance Bank, a 4.49% stake in Federal Bank, and 4.53% in City Union Bank.
According to the RBI intimation, HDFC AMC must ensure its aggregate holding in each bank does not exceed 9.5% of the paid-up share capital or voting rights at all times.
mayur.bhalerao@livemint.com
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