Recently the Government of India has taken steps to limit and control the FDI from neighboring countries. Even though the name of china is not taken directly, the reason was the same. Rahul Gandhi talked about it. I saw many peoples speak about it. The question is why only you are taking action after Peoples Bank of China, making their stake from 0.8% to more than 1%. When the HDFC or Housing Development Finance Corporation is already primarily owned by foreign entities. Let’s see this issue from all sides.
HDFC aspect. : HDFC, or Housing Development Finance Corporation, is one of the oldest financial institutions in India. Housing is a company run by some professional people. It was incorporated in 1977 as the first specialized mortgage company in India. This company today provides different kinds of services. Banking through HDFC bank, General insurance Through HDFC ERGO, Life insurance through HDFC Standard life insurance, Education loans through HDFC CRedila, and other services. HDFC was promoted by the Industrial Credit and Investment Corporation of India, the Promoter of today’s ICICI Bank.
In the business of lending, if you want to increase your lending capacity, you need more funds. Banking, in simple words, is Borrowing at a lower rate and lending at a higher rate. If you don’t do anything dumb, you are a prosperous banking institution. As the bank is coming in contact with the public money, Regulators like RBI make rules like keeping minimum CAPITAL. that will be acting as a buffer so even if the Default happened, the risk would be taken by Equity shareholders. How efficient the management decides the success and worth of the banking company. HDFC is, beyond doubt, one of the finest.
That is the reason why this company is famous among shareholders. As per March 2020 Shareholding Pattern Given by the company to BSE, 4,75,106 shareholders hold shares of HDFC in their portfolio. Industrial credit and investment corporation of India reverse merged with ICICI bank, so there is no promoter for HDFC. 37 Mutual Fund schemes hold this share in their portfolio, but many are index funds. SBI Nifty ETF is the largest among those holding. Thirty-seven insurance companies have around 8%, out of which half is LIC.
But today’s the subject of the talk is foreign investors. They are real owners of the company. 1765 foreign investors including institutions own 70.88% company or 1,22,75,99,385 shares. INVESCO OPPENHEIMER DEVELOPING MARKETS FUND ( 3.33%), GOVERNMENT OF SINGAPORE ( 3.23%), VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ( 1.74%), GOVERNMENT PENSION FUND GLOBAL( sovereign Wealth fund of Norway government, hold 1.11%), STICHTING DEPOSITARY APG EMERGING MARKETS EQUITY POOL ( Spanish mutual Fund holding 1.07%) held more than what peoples bank of china help in HDFC. 1.01%.
Here I want to share something as an analyst and investor who loves to read an annual report. Management and board of directors are beyond a doubt some knowledgable people. But they don’t have many Indian shareholders on their shareholding list. So in 2015-16, when HDFC bank, the banking subsidiary of HDFC, wanted to raise the capital, they requested RBI to classify HDFC as Indian. After checking their shareholding pattern, RBI tells them they should raise capital from Indian investors as raising more money from foreign shareholders may break the limit set up by RBI on Shareholding by foreign investors. So even though SEBI is the regulator of the capital market, permitting foreign investment is in the hand of RBI in India. The reason is this investment makes the flow of foreign capital. They don’t like it. So the bank applied for permission for 100% foreign ownership. They received it. The reason for this is when one institution holds a prominent position. Management is supposed to answer them. But HDFC made their shareholders so broad that it’s nearly mandatory for some investors to invest in HDFC.
CHINA FDI, Vision Fund, Masayoshi son PBoC, One97 communication FDI policy of India, etc.
First things first. Arun Jaitley abolished FIPB, the Foreign Investment Promotion Board, an entity specially made for deciding what type of FDI was welcomed 25 years ago. The Government then said that this move would boost MAKE In INDIA. I don’t want to comment on it, which can make this post a bit political.
From the start of its economic growth, China has concentrated on significant investments. As Indian startups in the technology sector are booming, we can safely say that today’s startups can be tomorrow’s big companies. A recent example is Flipkart. Flipkart was incorporated in India, but they went to Singapore due to the wrong tax policy. Softbank, Alibaba, sequoia, and Temasek are some names interested in investing in Indian startups. Sadly they already invested in Big Basket, Byju’s, Delhivery, Dream 11, Flipkart, Hike, MakeMyTrip, Ola, Oyo, Paytm, Paytm Mall, PolicyBazzar, Quikr, Rivigo, Snapdeal, Swiggy, Uddan, Zomato. Vision Fund is one massive name in this industry. When the Venture capital industry was not even $100 billion, Masayoshi Son made one big Fund with an initial capital of $100 billion. After that, it started investing in some big and small startups. Flipkart was his first success, proving that such a big fund can make some significant returns. By selling his stake in Flipkart to Walmart, Vision fund doubled its money in just one year.
The reason this is all happening is a faulty financial system. We hardly understand that for growth, capital is needed. But also some professional help is needed. China was always ready with money wherever it required. Just today, I was reading the article on Moneycontrol that while taming the dragon, India might be harming its baby elephant. I agreed. We already lost Infosys, ICICI Bank, HDFC, HDFC bank, and L&T to American investors. We are in the process of losing our startups to Chinese people.
In my view, we need the CULT OF AN INVESTORS WHO ARE READY TO TAKE RISK. FALLING IN LOVE WITH GOLD WILL NOT HELP. GOLD IS A HEDGE. REAL ESTATE MAY HELP, BUT IT IS NOT THAT MUCH LIQUID. WE DON’T HAVE MANY COMPANIES, SO WE NEED MANY NEW COMPANIES TO MAKE EMPLOYMENT, AND WE ALSO NEED NEW INVESTORS WHO CAN HOLD A SMALL COMPANY AND UNDERSTAND WHAT TGIS NEW STARTUPS NEED.
