About the People’s Bank of China
The Central Bank of Republic Of China, The People’s Bank of China is responsible for carrying out monetary policy and regulation of financial institutions in China. It is at $3.21 trillion in valuation. Since July 2017, the bank has had the largest financial asset holdings of any central bank in the world since July 2017, it is a registered foreign portfolio investor.
People’s Bank of China increased the stake in HDFC Ltd.
1.75 crore shares were purchased by The People’s Bank of China (PBOC) in one of the largest housing finance lenders, HDFC Ltd, in the March quarter.
HDFC Ltd. has a presence in banking, life and general insurance, asset management, venture capital, realty, education, deposits and education loans.
1,74,92,909 crore shares have been bought by the Chinese Central Bank, or 1.01 percent of the shareholding, according to exchange data. Between January and March, the share purchase is likely to have happened.
While the Securities and Exchange Board of India’s (SEBI) site showed PBOC as a registered FPI, it didn’t disclose the date of registration. HDFC ‘s shareholder base has risen by 1.01 lakh to 4.75 lakh at the end of March from 3.71 lakh investors as of December.
The shares have been sliding of HDFC due to the pandemic in recent weeks, hence the timing of the share purchase is significant. Also, There has been a fall in shares of 44%. The shares of HDFC have fallen 32 percent from its 52-week high of Rs 2,499.65 on January 14, 2020. Sensex lost 25 percent while 50-share Nifty closed 26 percent down, the benchmark equity indexes of India, in the same period. HDFC shares closed at Rs 1,701.95 on April 10. HDFC has seen significant interest from institutional investors, of late, for example, the Life Insurance Corporation of India (LIC) increased its holding in HDFC Ltd by 0.46% to 4.67 percent from 4.21 percent in December quarter.
What else does Keki Mistry have to say?
Keki Mistry, HDFC’s Vice Chairman, and CEO told Moneycontrol that the People bank of China (PBOC) is an existing shareholder and had owned 0.8 percent in the company as of March 2019. The stake has hit the 1 percent regulatory threshold and hence the disclosure has been made. The shares have been accumulating over a year and are now holding 1.1 percent. In major financial institutions in Asia amid the stock market crash in major economies, China has been buying stakes in recent years, especially in Asian countries, including Pakistan and Bangladesh, investments mainly in infrastructure projects and technology companies have increased.
Also Read: Coronavirus and steps taken by RBI
Should people fear that this move could lead to the acquisition of HDFC Ltd by the Chinese Bank?
Most Noteworthy, Mistry also stated that people should not fear about People’s Bank of China’s (PBOC) move to acquire about a one per cent stake in HDFC. He said that they (PBOC) are passive shareholders. The stake increase is certainly not the objective of either taking over the company or taking over the management. The safeguards are there so to make sure that nobody can go and change management.
Above all, Deepak Parekh, HDFC chairman stated Moneycontrol that the transaction is done on the behalf of the Chinese sovereign wealth fund, SAFE and not for the Chinese Central bank. He also said that there is no issue here, since PBOC have been buying stake since the last two years and that they are buying for sovereign wealth fund. The front is the People’s Bank as they must be having a foreign exchange, and when the price came down, they bought more shares. The Chairman of HDFC Bank stated that Saudi Arabian Monetary Authority (SAMA) has also picked up a 0.7% stake in HDFC on behalf of the Saudi sovereign wealth fund since its stake is less than 1% SAMA’s name isn’t reflected in the names of major shareholders.
HDFC has become the favourite among FPI’s
Moreover, among foreign portfolio investors, HDFC is the hot favourite over 70% of the company’s shares are owned by them. 70.88% stake is owned by Foreign portfolio investors in the company. The Chinese, the sovereign fund from Saudi Arabia and the state-controlled Temasek in Singapore have a stake in it. The PBOC will also get a share of the profits from HDFC Bank (India’s largest private bank). It will also have HDFC Asset Management Company, HDFC Life Insurance. Moreover, it will have HDB Financial services and 98 percent in HDFC Securities, by buying a stake in HDFC – the People bank of china.
Here is a table showing HDFC’s stake in its subsidiaries:
|Group Company||HDFC’s stake|
|HDFC Asset Management Company||52.70%|
|HDFC Life Insurance||51.45%|
|HDB Financial Services||96%|