JP Morgan, Citigroup to help govt sell Axis Bank stake; HDFC Bank awaits FIPB nod

The government is reported to have selected merchant bankers JPMorgan Chase & Co, Citigroup Inc and  JM Financial Ltd for helping to offload half of its 20.7 per cent stake in private sector Axis Bank even as the Foreign Investment Promotion Board (FIPB) will consider a proposal by HDFC Bank to increase overseas shareholding limit early next month.

These are part of the government's efforts to open up the financial and banking sector while at the same time finding necessary sources of funds for investment, both in the public and private sectors, while at the same time reducing the government's fiscal deficit.

A meeting of the FIPB on 3 February is expected to decide on HDFC Bank's application seeking "to maintain the permissible foreign holding in the bank up to 67.55 per cent of the total paid-up capital, out of which the FII sub-limit would be 49 per cent and the balance 18.55 per cent would be FDI".

The sale of nearly 10.5-per cent stake in the private lender Axis Bank is expected to fetch the government around $925 million, sources close to the development said.

The sale is part of a search for funds to narrow the government's fiscal deficit to 4.8 per cent of gross domestic product in the financial year ending March 2014, from 4.9 per cent a year earlier.

The government which had proposed to raise around $9 billion through sale of equity in public sector units has so far managed to raise only 3 per cent of that amount.

Half of its 20.7-per cent stake in India's third-largest private-sector bank by assets is likely to be auctioned by the end of February.

Axis bank has a current market cap of the bank, the stake on offer is worth about Rs5,700 crore, the sources said.

On Monday, the government approved the auction of its residual stake in Hindustan Zinc Ltd, controlled by London-listed Vedanta Resources Plc. It has also lined up a 10 per cent stake sale in Indian Oil Corp.

The Foreign Investment Promotion Board (FIPB) will consider a proposal by HDFC Bank to increase the overseas shareholding limit on 3 February.

The bank is reported to have sought permission "to maintain the permissible foreign holding in the bank up to 67.55 per cent of the total paid up capital, out of which the FII sub-limit would be 49 per cent and the balance 18.55 per cent would be FDI".

The Reserve Bank of India (RBI) had recently said that foreign shareholding in HDFC Bank had crossed the overall limit of 49 per cent of its paid-up capital and that no further purchases of the bank's shares would be allowed through Indian stock exchanges on behalf of overseas investors, including NRIs, persons of Indian origin and holders of depository receipts.

Foreign shareholding in the bank as of 13 December 2013 was 52.18 per cent.

"Since the total foreign shareholding in the bank (FII and FDI) has crossed 49 per cent, the bank has filed an application with the FIPB seeking approval for increasing its foreign shareholding limit," HDFC Bank had said in a BSE filing.