LIC owns HDFC Bank shares worth nearly ₹50,000 crore, it can now increase that stake further - CNBC TV18 (2024)

Life Insurance Corporation of India Ltd. (LIC) can now own up to 9.99% stake in HDFC Bank, the private lender informed the exchanges on Thursday evening.

The Reserve Bank of India (RBI) gave its nod to LIC, India's largest insurance company, to acquire up to 9.99% stake in India's largest private sector bank.

Additionally, the RBI has also asked LIC to increase its stake in HDFC Bank to the approved levels within a period of one year, that is by January 24, 2025.

As of December 31, LIC owns 5.19% stake in HDFC Bank, which as per Thursday's closing price, is valued at nearly ₹50,000 crore, or ₹48,922 crore to be precise.

LIC has also increased its stake in HDFC Bank over the last few quarters. As of December 2022, the insurance giant had a 4.1% stake in HDFC Bank.

HDFC Bank's shares have been under pressure recently after its December quarter results. The resultant fall has not only led to an erosion of $25 billion in its market capitalisation from its July 2023 peak, but also narrowed the valuation gap it had with India's fourth-largest private lender, Axis Bank.

The week before the recently concluded truncated week saw HDFC Bank's stock slide 11%, marking its worst week since March 2020. January is also turning out to be the worst month for the lender since March 2020 with its market capitalisation also falling below the ₹11 lakh crore mark.

Some voices on the street though, continue to remain bullish on the lender despite the recent hiccups. Samir Arora of Helios Capital told CNBC-TV18 that he will not be a seller here. You can read more on that here.

The recent developments have also gotten the bank into firefighting mode, with top sources telling CNBC-TV18 that the HDFC Bank franchise is solid and "nothing can stop this juggernaut." The source also expressed confidence in the bank adding another HDFC Bank every four years.

In response to this development, Kaitav Shah, Lead BFSI Analyst at Anand Rathi Institutional Equities, expressed optimism on CNBC-TV18, stating that this is indeed positive news. LIC, known for its long-term investment approach in India, tends to focus on value buying. Considering that HDFC Bank is currently trading below the mean average multiples of the past decade, support from institutional investors like LIC is seen as beneficial for the bank.

HDFC Bank's shares fell 2.5% during the truncated week, marking its fourth straight weekly loss.