On January 25, the Reserve Bank of India (RBI) granted approval for Life Insurance Corp. of India (LIC) to acquire up to 9.99 percent of HDFC Bank, as reported by the country’s largest private bank in an exchange filing.
Time Frame and Restrictions
HDFC Bank stated that LIC has been advised by the RBI to complete the acquisition within one year, by January 24, 2025. Additionally, LIC must ensure that its aggregate holding in HDFC Bank does not exceed 9.99 percent of the paid-up share capital or voting rights of the bank at any given time.
Current LIC Holding
As of December 31, LIC holds a 5.19 percent stake in HDFC Bank, according to the bank’s shareholding pattern.
Market Response and Recent Developments: Positive Impact on Shareholders
The announcement is anticipated to have a positive impact on HDFC Bank’s shareholders. This development follows a period of heavy sell-off in HDFC Bank shares, which had approached near 52-week lows after the bank’s third-quarter earnings announcement.
Clarification on Recent Share Price Movement
HDFC Bank addressed concerns about the sell-off, stating that there was no evidence linking it to the Securities and Exchange Board of India (Sebi) guidelines. The bank emphasized that companies with no identifiable promoters, including HDFC Bank, would not be significantly affected by the Sebi circular.
Share Price and Financial Performance
As of January 25, HDFC Bank’s shares closed at Rs 1435.30 apiece on the BSE, marking a 1.41 percent decrease from the previous close. The bank reported a net profit of Rs 16,372 crore for the October-December quarter of the financial year 2023-24, reflecting a 33.5 percent increase from the previous year. The net interest income (NII) also saw a robust growth of 23.9 percent, reaching Rs 28,470 crore.
Asset Quality and Provisioning
While HDFC Bank reported a slight increase in gross non-performing assets (NPA) to 1.26 percent, the net NPA for the quarter decreased to 0.31 percent. The bank’s Chief Financial Officer, Srinivasan Vaidyanathan, noted an improvement in asset quality. Provisions for the quarter rose by 50 percent, including contingent provisions related to investments in alternative investment funds.
Loan Portfolio Growth
HDFC Bank witnessed significant growth in its total advances, with a jump of 62.4 percent to Rs 24.69 lakh crore. The bank’s domestic retail loans grew by 111 percent, commercial and rural loans grew by 31.4 percent, and corporate and wholesale loans (excluding non-individual loans of HDFC Ltd.) increased by 11.2 percent.
In summary, the regulatory approval for LIC’s increased stake, along with HDFC Bank’s positive financial performance, provides a comprehensive overview of recent developments in the banking sector.
