IDFC stock down 8.3% on FII buying restriction

IDFC revised ceiling on investment by FIIs and NRIs to 54% from 74%

The stock of Infrastructure Development Finance Corporation (IDFC), an aspirant for a new banking licence, fell 8.3 per cent to Rs 94.95 on Monday, after the company barred fresh purchases of its shares by foreign institutional investors (FIIs) and non-resident Indians (NRIs).

The infrastructure finance company also revised the ceiling on investment by FIIs and NRIs to 54 per cent from 74 per cent.

IDFC imposed these restrictions to help it meet the Reserve Bank of India’s (RBI) restriction on foreign investment (at less than 50 per cent for new banks) in case it gets a licence.

The company said it had written to custodian banks, entities that act on behalf of foreign investors, not to make any further purchase of IDFC shares through the secondary market on behalf of FII or NRI clients.

The action follows a central bank directive to decrease foreign investment limit in Indian companies. This has brought down the ceiling for foreign shareholding in IDFC from 74 per cent to 54 per cent. The current foreign shareholding in IDFC is 53.71 per cent.

Shareholders in the company include the Singapore government, Vanguard Emerging Markets Stock Index Fund, HSBC Global Investment and JP Morgan Sicav Investment Company.

Senior IDFC official said the company had requested to reduce its foreign shareholding to make it easier to comply with RBI’s regulations for new bank licences.

According to RBI’s norms for new bank licences, foreign ownership in new banks should be restricted to less than 50 per cent. Now it will be easier to meet RBI norms if an NBFC gets a licence, said an official.

IDFC is one of the 26 entities that have filed applications with RBI for a bank licence.