LIC to acquire 9.99% stake in HDFC Bank

The Reserve bank of India (RBI) on Thursday accorded its approval to Life Insurance Corporation (LIC) for acquiring up to 9.99% stake of the paid-up share capital or voting rights of HDFC Bank.

India's largest insurer LIC has been advised by the banking regulator to acquire this shareholding in the bank within a period of one year by January 24, 2025.

"Further, LIC must ensure that the aggregate holding in the Bank does not exceed 9.99% of the paid-up share capital or voting rights of the Bank at all times," the HDFC Bank says in a regulatory filing.

As of December 31, 2023, LIC owns 5.19% stake in HDFC Bank. This stake is valued at roughly ₹49,000 crore.

The approval has been granted with reference to the application made by LIC to RBI, the filing says.

Shares of India's biggest private lender HDFC Bank continued their slide on Thursday. The stock has dropped 14% since it reported lower-than-expected earnings for the quarter ended December. The lender's market cap has fallen under ₹11 lakh crore.

Net profit of the private lender rose 33.5% year-on-year to ₹16,370 crore in the third quarter. The bank’s net interest income (NII) - interest income earned from loans after knocking off interest paid on deposits - witnessed a growth of 23.9% to ₹28,470 crore as against ₹22.990 crore in the corresponding period of the previous year.

The bank's net revenue surged 25.8% to ₹39,610 crore for the quarter ended December 31, 2023, from ₹31,490 crore in the year-ago period. The core net interest margin for the quarter stood at 3.4% on total assets and 3.6% based on interest-earning assets. The bank earned ₹11,140 crore as "other income" during the quarter against ₹8,500 during the year-ago period.

HDFC Bank's operating expenses for the quarter were recorded at ₹15,960 crore, an increase of 28.1% over ₹12,460 crore during the corresponding quarter of the previous year. The bank's cost-to-income ratio stood at 40.3% during Q3 FY24.

Provisions and contingencies for the quarter were at ₹4,220 crore against ₹2,810 crore in the year-ago period. "Total provisions for the current quarter included contingent provisions of ₹1,220 crore," the bank says.

The bank's total deposits surged by 27.7% YoY at ₹22,14,000 crore as compared to December 31, 2022. The CASA (current account and savings account) deposits grew 9.5%, with savings account deposits at ₹5,79,900 crore and current account deposits at ₹2,55,800 crore.