HDFC Bank had applied for yet another FIPB approval, this time for expanding its equity base by up to Rs 10,000 crore, sources said.
HDFC Bank and Ratnakar Bank today got clearance from government panel Foreign Investment Promotion Board for their respective FDI proposals.
HDFC Bank had applied for yet another FIPB approval, this time for expanding its equity base by up to Rs 10,000 crore, sources said.
The board headed by Economic Affairs Secretary Rajiv Mehrishi has approved bank's proposal, sources said, adding that the bank requires FIPB nod for expanding equity before Cabinet Committee on Economic Affairs CCEA's clearance.
HDFC Bank sought fresh FIPB clearance for expanding equity. It already has shareholders' nod to raise up to Rs 10,000 crore by July, the sources added. Besides, the board has also cleared Ratnakar Bank's proposal for capital raising.
Last month, the FIPB cleared the long-pending proposal of HDFC Bank to hike foreign holding in the bank to 74 percent. The FIPB felt that the bank's parent HDFC Ltd's 22.5 percent holding in it is FDI and hence total foreign holding is 73.2 percent, which includes FII, FDI, ADR and GDR. Total foreign investment in HDFC Bank was 73.39 percent at the end of June 2014. It came down to 73.2 percent at the end of September 2014.
Late last year, HDFC Bank, a foreign-owned lender, had approached the FIPB for increasing the foreign holding in the bank to 67.55 percent from 49 percent. The bank had sought permission for raising foreign investment limit representing that 22 percent stake held by the parent HDFC Limited is a domestic investment.
However, the proposal was not cleared by the FIPB as the Finance and Industry ministries were of the view that HDFC Ltd's 22.5 percent holding in the bank is FDI.
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Taking into consideration the 22.5 percent parent holding as FDI, the total foreign holding was more than 67.55 percent when they approached the FIPB for the first time.
Following clarification sought by FIPB earlier this year, HDFC Bank had sent a revised proposal raising its foreign holding ceiling request to 74 percent, from its earlier proposal of 67.55 percent.
Banks can have up to 49 percent foreign investment without regulatory approval but require approval from RBI and the FIPB if they want to increase the foreign investment limit to 74 percent.
While India allows FDI in most of the sectors through automatic route, FIPB in the Finance Ministry is required in certain sectors like pharmaceutical and defence, considered sensitive for the economy.
HDFC Bank stock price
On December 19, 2014, HDFC Bank closed at Rs 940.80, up Rs 6.75, or 0.72 percent. The 52-week high of the share was Rs 965.45 and the 52-week low was Rs 618.00.
The company's trailing 12-month (TTM) EPS was at Rs 38.35 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 24.53. The latest book value of the company is Rs 179.96 per share. At current value, the price-to-book value of the company is 5.23.
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