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

04 June, 2014

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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1 Comment
S Santhanam . 3 years ago

A bird in hand is better than two in bush goes the saying. IDFC is the only FI in India with exclusive focus on infrastructure development. It has a portfolio of over Rs.5000 cr. GoI under Mr Modi emphasizes on infrastructure development. But, with the banking licence issued by the RBI, the country would lose the only infra dev company and the infra projects would suffer for want of funds. Now IDFC is struggling to raise resources, reduce foreign investments to make it eligible in becoming a commercial bank. After becoming a CB, it will not finance infra projects and will join the rat race of other new generation banks in getting its share of the pie in CB market. It is sad that RBI has taken such a step. Perhaps, it can reverse it and save the institution. Will GOI do that?

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

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