HDFC Bank stock gains as FIPB clears 74% foreign investment limit

HDFC Bank shares gained as much as Rs13.10 (1.43 per cent) to close Rs929.30 on the Bombay Stock Exchange (BSE) today, on news of the Foreign Investment Promotion Board clearing a long-pending proposal for enhancing foreign investment limit in the bank to 74 per cent.

"FIPB today considered and approved HDFC Bank's proposal to raise foreign investment ceiling to 74 per cent," officials said after the FIPB meeting.

FIPB had not cleared the proposal earlier as it held the HDFC Bank' parent HDFC Ltd's 22-per cent stake along with FII, FDI, ADR and GDR holdings would take foreign ownership in the bank to 73.39 per cent.

"So the bank has little headroom to raise funds from foreign investors," the official said.

Late last year, HDFC Bank approached the FIPB for increasing the foreign holding in the bank to 67.55 per cent from 49 per cent.

However, FIPB did not clear the proposal as the finance and industry ministries were of the view that the parent HDFC Ltd's 22 per cent holding in the bank was FDI.

Following clarification sought by FIPB earlier this year, HDFC Bank sent a revised proposal raising its foreign holding ceiling request to 74 per cent, from its earlier proposal of 67.55 per cent.

HDFC Bank had reported a 21.1-per cent increase in net profit to Rs2,233.04 crore on 12.8 per cent increase in total income to Rs13,070.65 crore in Q1 June 2014 over Q1 June 2013.

The FIPB also cleared the proposal of pharma company Sanofi at today's meeting along with Punj Llyod's proposal to enter into defence production.