HDFC Bank can now raise Rs 10,000 cr via share sale to foreign investors

The approval comes at a time when some large banks are exploring fund-raising opportunities

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved HDFC Bank’s proposal to raise up to Rs 10,000 crore by selling shares to foreign investors. About a month ago, the Foreign Investment Promotion Board (FIPB) had also cleared the proposal.

A statement issued by CCEA said the approval was subject to aggregate foreign shareholding in HDFC Bank not exceeding 74 per cent of the post-issue paid-up capital. Media reports claimed total foreign investment in the bank stood at 73.2 per cent at the end of September 2014. A quarter earlier, it was 73.39 per cent.

On Wednesday, the HDFC Bank stock closed at Rs 1,058.1 on the BSE, down 1.5 per cent.

Earlier, HDFC Bank had approached FIPB to increase foreign shareholding in the bank to 74 per cent. According to regulations, while banks can have up to 49 per cent of foreign investment without regulatory approval, they need permission to increase it to 74 per cent. FIPB had approved the proposal in November last year.

Last year, the bank had taken the approval of its shareholders to raise up to Rs 10,000 crore of capital. According to reports, the approval is valid till July 2015.

The CCEA’s approval comes at a time when some large banks are exploring fund-raising opportunities. State Bank of India, for instance, plans to raise up to Rs 15,000 crore through a public offering, including rights issue of shares. The bank needs the funds to comply with new capital adequacy rules and finance growth in its assets. The bank will hold a shareholders’ meeting next month to seek their approval for the proposal.

SBI aims to raise the equity capital in one or more tranches. The funds are required to comply with the new capital adequacy rules and also to finance growth in the bank's assets. The money, along with the bank's retained earnings for 2014-15 (April-March), is expected to help the state-run lender in booking assets worth Rs 2 lakh crore by the end of next financial year.