The Reserve Bank of India (RBI) has granted approval to HDFC Bank, India’s largest private lender, to acquire up to a 9.5 percent stake in AU Small Finance Bank (AU SFB). The bank has one year from the approval date to finalize the acquisition, after which the approval will expire.
In a filing, AU Small Finance Bank said the approval, dated January 3, 2025, also pertains to HDFC Bank’s group firms, namely, HDFC Mutual Fund, HDFC Life Insurance Company, HDFC Pension Management Company, HDFC ERGO General Insurance Company, and HDFC Securities, to hold cumulatively up to 9.5 percent of its paid-up share capital or voting rights.
In another related development, HDFC Bank announced that it too has got the RBI approval to acquire as much as 9.5% stake in Kotak Mahindra Bank and Capital Small Finance Bank. The permission is granted till January 2, 2026.
It would, therefore, have to ensure at all times that the aggregate shareholding by the bank and its group companies in those institutions do not exceed 9.5 percent of the total issued share capital of those institutions. RBI Directions 2023 defines “aggregate holding” as “an aggregate of shares held by the bank and its subsidiaries and associates, mutual funds, trustees and the promoter group”.
Though the individual investment by HDFC Bank in those companies does not reach or breach the 5% threshold, when all its group firms are counted together, combined holding in them will cross above 5 percent. The bank, therefore sought the regulatory nod to hike the investment threshold.
Despite this positive development, HDFC Bank shares fell as part of a broader market sell-off on January 3. The stock declined 2.5 percent to close at ₹1,749. Trading volume surged with around 1 crore shares exchanging hands, against the one-month and one-week averages of 94 lakh shares, according to Moneycontrol data.
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Source: Moneycontrol
News Desk
