HDFC to pare stake for foreign investment in bank

Parent HDFC will pare its stake in HDFC Bank to create room for foreign investors. HDFC, the country's oldest mortgage lender which owns 22.5 per cent in HDFC Bank, will not step in as a buyer when the bank issues shares to local and foreign investors to raise Rs 10,000 crore, said three people aware of the decision.

The institution will let its stake dip to a little over 20 per cent in HDFC Bank where `foreign ownership', as defined by the government, is close to the maximum permissible 74 per cent. "HDFC will not participate in the share purchase but will, in fact, sell shares to make way for other foreign investors,'' said one of the persons. In the past whenever there has been a share dilution in HDFC Bank, HDFC had always purchased shares to preserve its holding in India's most valuable lender.

HDFC Bank shareholders have approved a proposal to raise Rs 10,000 crore capital by July 2015. The bank has appointed investment banks Bank of America Merrill Lynch, Credit Suisse, HSBC, JP Morgan, Morgan Stanley and Citi Group as advisors to the proposed fund raising. HDFC's decision is driven by the government's stand that the institution's holding in HDFC Bank should be treated as foreign ownership because more than 51 per cent of HDFC's stake is with offshore investors.

On November 14, the Foreign Investment Promotion Board, a government panel which clears foreign investments in Indian companies, cleared the bank's revised proposal to increase foreign investment in the bank to 74 per cent. But the board's decision did not leave headroom for more foreign investment in HDFC Bank as the combined stake of HDFC, foreign portfolio investors and holders of ADR and GDR receipts in the bank is close to 74 per cent. "HDFC Bank's proposed fund raising would be a combination of ADRs and local share issuance to mutual funds and insurance companies. Since the headroom available is slim, a local share sale without parent's participation will allow space for foreign investors," said a person familiar with the plan.

"The fund raising exercise is still some time away. A decision on the timing of the issue will be taken in December and money will be raised only next year," said an investment banker. Analysts appear to have factored in HDFC's decision not to participate in any share purchase. ''HDFC Ltd may not be able to participate in a fresh issue of shares or restore its holding to 22.5 per cent as the FIPB turned down the bank's plea to not treat the promoter stake as foreign investment,'' said Dinesh Shukla, banking analyst at brokerage Sharekhan.

A 20 per cent stake will allow HDFC to consolidate in its balance-sheet the proportionate net profit of HDFC Bank.


Source : Economic Times

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Axis Bank raises $500 mn through overseas bonds

India’s third largest private lender, Axis Bank raised $500 million from the overseas debt market through unsecured bonds at a fixed coupon rate of 3.25 per cent for a 5.5 year tenure.

“The deal was launched at initial price thoughts at US Treasuries + 195 bps but the final pricing was 25 bps tighter than initial price thoughts at T + 170 bps… The unsecured notes are issued by Axis Bank’s DIFC branch, Dubai and are rated Baa2 by Moody's, BBB- by S&P and BBB- by Fitch,” Axis bank said in a statement.

The bonds were oversubscribed from investors in Asia, Middle East, Europe and the US… The coupon of 3.25 per cent is the lowest ever for a US Dollar deal of 5.5-year period, the bank said.

Barclays, Credit Agricole CIB, HSBC, JP Morgan and Standard Chartered acted as joint book-runners and lead managers.

“The Notes have been issued at a price of 99.656 to yield 3.319 per cent. The notes will be denominated in US dollars, and will bear fixed interest of 3.250 per cent per annum, with interest payable semi-annually in arrears. Axis Bank will apply the net proceeds to meet the funding requirement of its foreign branches and for general corporate purposes,” it added.

Sidharth Rath, President-Treasury, Business Banking & Capital Markets, Axis Bank said, "We are pleased to receive a warm welcome from investors on our return to the international bond markets after a long absence. The response demonstrates the global investor’s positive interest in the Indian economy and the banking sector."


Source : Thehindubusinessline

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FM’s thoughts, actions to augur well for economy: Citi

Government’s reform measures on GST, labour and land acquisition laws should augur well for the economy and equity markets, global brokerage firm Citigroup said today.

It said there is a lot happening that should see the light soon with respect to Goods and Services Tax (GST), land acquisition law modifications and changes to labour laws.

“The FM’s thoughts and actions should augur very well for India’s economy and its equity market,” Citigroup said in a report on Finance Minister Arun Jaitley’s meeting with investors yesterday.

“We were impressed ... believe the market should be too,” Citigroup said, adding the government has cleared environmental backlog, FDI in defence and railway infrastructure and diesel deregulation.

Also the resolution to coal sector problems and opening up of commercial mining and planned increased in FDI cap in insurance sector have buoyed market sentiments.

“Action does speak louder than words. The market and mood have moved up ... on expectations yes, but on a lot of action too,” it said.

The Minister sees high cost of capital, domestic bank financing, legal framework for contract enforcement and the weak global environment as challenges, it added.


Source : Thehindubusinessline

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74% accounts in Jan Dhan Yojana are with zero balance

Around Rs. 5,400 crore have been deposited in banks in over seven crore bank accounts opened under Pradhan Mantri Jan Dhan Yojana (PMJDY) of which 74 per cent accounts are with zero balance, according to an RTI reply.

The data provided by Department of Financial Services says that as on November 7, 2014 a total of 7.1 crore bank accounts have been opened of which 5.3 crore were accounts with ‘Zero balance’.

The reply provided to activist Subhash Agrawal said as on November 7, the total balance in these accounts was Rs. 5,482 crore. Majority of these accounts, over 4.2 crore, have been opened in rural areas, whereas in urban areas 2.9 crore have been opened.

The highest number of accounts under the scheme, have been opened by State Bank of India which started over 1.2 crore new accounts followed by Bank of Baroda which opened 38 lakh accounts and Canara Bank 37 lakh accounts, it said.

PMJDY is national mission for financial inclusion to ensure access to financial services, namely, banking and savings and deposit accounts, remittance, credit, insurance, pension in an affordable manner.

It focuses on coverage of households as against the earlier plan which focused on coverage of villages.

An overdraft facility up to Rs. 5,000 would be available to one account holder of PMJDY per household after six months of satisfactory conduct of the account.


Source : Thehindubusinessline

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No PAN requirement for investment in Kisan Vikas Patra

The Finance Ministry has said that there will not be requirement of Permanent Account Number or PAN in puttig money in relaunched Kisan Vikas Patra. There will also not be any upper limit on investment.

The Finance Minister Arun Jaitley and Communication Minister Ravi Shankar Prasad relaunched KVP on Tuesday. The scheme aims to boost saving and use them for long term capital requirement. "This will be a bearer instrument just like currency and easy to encash," he said.

In view of the popular demand and to revitalize Small Savings, the Finance Minister in his Budget Speech announced that KVP a very popular instrument among small savers will be reintroduced. The instrument will encourage people, who may have banked and unbanked savings to invest”. KYC norms regarding all National Savings Schemes (NSS) are now applicable in post offices and banks w.e.f. January, 2012.

It will be available to the investors in the denomination of Rs. 1000, Rs. 5,000, Rs. 10,000 and Rs. 50,000, with no upper ceiling on investment. The certificates can be issued in single or joint names and can be transferred from one person to any other person / persons, multiple times. The facility of transfer from one post office to another anywhere in India and of nomination will be available. The certificate can also be pledged as security to avail loans from the banks and in other case where security is required to be deposited.

Initially the certificates will be sold through post offices, but the same will soon be made available to the investing public through designated branches of nationalised banks. An investor can encash his certificates after the lock-in period of 2 years and 6 months and thereafter in any block of six months on pre-determined maturity value. The investment made in the certificate will double in 100 months.

The scheme will also safeguard small investors from fraudulent schemes. With a maturity period of 8 years 4 months, the collections under the scheme will be available with the Government for a fairly long period to be utilized in financing developmental plans of the Centre and State Governments and will also help in enhancing domestic household financial savings.

Earlier, it was launched by the Government on April 1, 1988. The scheme provided facility of unlimited investment by way of purchase of certificates from post offices in various denominations. The maturity period of the scheme when launched was 5 ½ years and the money invested doubled on maturity.

The scheme was very popular among the investors and the percentage share of gross collections secured in KVP was in the range of 9 per cent to 29 per cent against the total collections received under all National Savings Schemes in the country.

Gross collections under the scheme in the year 2010-11 were Rs. 21,631.16 crore which was 9 per cent of the total gross collections during the year. In the year of its closure, the scheme secured gross collections of Rs. 7,575.95 crore (April 2011 to November 2011).


Source : Thehindubusinessline

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