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IDFC to issue fresh shares to domestic investors to bring down foreign holding below 50%

Financial services firm Infrastructure Development Finance Company Ltd (IDFC), which has got an in-principle approval from RBI to start a new bank, has decided to issue fresh shares which would indirectly enable it to bring down foreign holding in the company below 50 per cent as per norms for new banks, the company said in a stock market disclosure.

IDFC board on Tuesday gave in-principle approval for a proposed domestic fundraising either through a follow-on public offer or a preferential placement, to bring down the foreign shareholding.

The company did not indicate a timeline nor the quantum of funds it may raise in the proposed issue.

As per the new banking licence norms, the aggregate non-resident shareholding from FDI, NRIs and FIIs in the new private sector banks shall not exceed 49 per cent for the first five years from the date of licensing of the bank.

Moreover, no non-resident shareholder, directly or indirectly, individually or in groups, will be permitted to hold 5 per cent or more of the paid up capital of the bank. After the expiry of five years from the date of licensing of the bank, the foreign shareholding would be as per the extant policy. Currently, foreign shareholding in private sector banks is allowed up to a ceiling of 74 per cent of the paid up capital.

As of March 31, 2014 foreign shareholding in the company stood at around 53.69 per cent, bulk of it through portfolio investors.

The company needs to issue at least 145.2 million shares to dilute the existing foreign holding to meet the norms, as per VCCircle estimates. At the latest market price IDFC would need to issue shares worth around Rs 1,973 crore ($335 million) to push domestic holding to 51 per cent.

The financial services firm counts among its investors Malaysian sovereign wealth fund Khazanah and PE firm Actis.

Meanwhile, the company’s board has nominated Rajiv B. Lall as executive vice chairman of the banking company, as and when that is set up and informed that Shardul S. Shroff has resigned as independent director of the firm with effect from June 3, 2014.

The firm's scrip closed at Rs 135.85, up 3.66 per cent on BSE in a weak Mumbai market on Wednesday.

(Edited by Joby Puthuparampil Johnson)

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