RBI Allows Settlement Of Foreign Investors’ Friday Trades In HDFC Bank
RBI had barred FPIs from buying HDFC Bank shares after their holding breached 74% cap.
Foreign investors’ holding in HDFC Bank Ltd. will stay marginally above the 74 percent cap, for now.
The Reserve Bank of India (RBI) has asked custodians to settle February 17 trades that took place before 1:38 p.m. on the National Stock Exchange Ltd. and before 1:39 p.m. on the BSE Ltd., said a custodian at a foreign bank who didn’t want to be quoted.
What this means is almost all the trades worth up to Rs 2,300 crore that had breached the cap on Friday (February 17) will be settled.
According to data compiled by BloombergQuint, foreign portfolio investors (FPIs) owned 71.98 percent in HDFC Bank in December-end. The FPI holding fell marginally to 71.9 percent -- or 2.1 percent below the cap -- when the company issued 29 lakh shares after some employees exercised stock options on January 27, 2017, according to the bank’s disclosures to exchanges.
As a result, the RBI allowed FPIs to buy HDFC Bank shares, giving foreign investors a headroom to acquire up to 2.1 percent, or 5.37 crore shares, from the open market. At Friday’s closing price, these shares were worth a little over Rs 7,400 crore.
February 17 Trades
On Friday, 10.6 crore HDFC Bank shares traded on the two exchanges, according to data on their websites. Of these, 10 crore shares -- or 94 percent of the day’s volume -- were traded on the NSE alone.
Seven crore shares were marked for delivery on Monday on the two exchanges, the data showed. This is way higher than a combined average of 8.7 lakh shares that were delivered daily on the NSE and BSE over the past one month.
Which means most of the demand came from foreign investors.
The seven crore shares marked for delivery were valued at Rs 9,700 crore, or 2.75 percent of HDFC Bank’s equity. This exceeded the headroom of 2.1 percent available to FPIs by 0.65 percentage points.
So, in effect, FPIs bought almost 0.65 percent HDFC Bank shares over and above the 74 percent cap. At Friday’s closing price, these shares were valued at Rs 2,300 crore.
The trades will be settled and the RBI will keep HDFC Bank in the "ban list" till the foreign holding falls below 72 percent again, said the custodian cited above.
RBI did not respond to emails sent by BloombergQuint, inquiring about the process, the breach of the foreign investment limit and the liability. Custodians did not want to come on record on the HDFC Bank trades, while NSE and BSE refused to comment on the story.