The Reserve Bank of India (RBI) has approved Life Insurance Corporation of India’s (LIC) huge 9.99% ownership acquisition of HDFC Bank Ltd., marking a major step forward. By January 24, 2025, LIC is to complete the acquisition within a year, according to the clearance detailed in a stock exchange filing.
As stated in the report, HDFC Bank requires LIC to make sure that at all times, its total stake in the bank does not exceed 9.99% of the paid-up share capital or voting rights. Severe requirements for obtaining the permission include adherence to the Foreign Exchange Management Act of 1999, RBI guidelines on acquisition, Master Direction and Guidelines on Banking Regulation Act of 1949, and other pertinent legislation.
The recent 52-week low the Mumbai-based lender endured as a result of weak third-quarter results and selling by foreign portfolio investors is anticipated to be alleviated by this event, which should be encouraging news for HDFC Bank shareholders. HDFC Bank ended the day with a 1.4% decrease in value at Rs 1,435.3 in its BSE stock price.
ADRs issued by HDFC Bank on the New York Stock Exchange also showed promise at the same time, rising 1.8% to $55.8 as of 10:50 a.m. EST.
Concerns are raised as HDFC Bank’s core net interest margin (NIM) on total assets dropped to 3.4% from 3.65% in the previous quarter, even though the bank’s standalone net profit for the third fiscal quarter beat analyst expectations. These margins were notably higher than 4% prior to the July of last year’s merger with HDFC.
Jeffreys analysts called margins a “key miss,” noting that improving retail deposit mobilization and lending will be essential to raising NIMs.
With ramifications for both LIC and HDFC Bank as well as possible wider banking industry effects, this RBI decision represents a calculated strategic move.
With inputs from Reuters
