Financial services firm IDFC saw its share price crash to a four year low on Tuesday after it restricted foreign investment limit to meet the norms for getting a new banking licence. The firm which has interests in infrastructure financing, institutional equities besides asset management under both mutual funds and private equity, is one of the firms in queue to grab a licence to operate a bank.
IDFC scrip lost over 16 per cent to close the day at Rs 79.2 a share on the BSE in a weak Mumbai market on Tuesday.
The company’s board had earlier passed a resolution for decreasing the limit for the purchase of its equity shares and convertible debentures by foreign institutional investors (FIIs), through primary market and stock exchanges, under the Portfolio Investment Scheme from 74 per cent to 54 per cent of its paid up capital. The same was noted by RBI which issued a statement to that effect on Monday.
The company imposed these restrictions to help it meet the RBI’s restriction on foreign investment at less than 50 per cent for new banks.
As a result the foreign holding limit across FIIs, FDI, NRIs, OCBs and foreign nationals have now been reduced to 54 per cent. Currently the foreign holding is pegged at around 53.71 per cent, which means foreign investors and particularly FIIs, who drive much of stock movement in the country, would be unable to buy any significant shares of the company going forward. This has led to the price going into a tail spin.
As on June 30, 2013, the FII holding in IDFC was 52.19 per cent, while the NRIs held 0.3 per cent.
The shareholders in IDFC include sovereign wealth funds of Malaysia (Khazanah) and that of Singapore besides Actis and Mount Kellett Capital among others.