According to the 2009 FDI policy, a company with more than 50% shares owned by foreigners would be considered foreign-owned and any investment by that entity in an Indian company would also come under the purview of foreign investment. Almost 75% shares in HDFC are held by foreign institutional investors (FIIs).
HDFC, along with HDFC Investments and HDFC Holdings, has 22.64% stake in HDFC Bank and foreign institutional investors hold 34.08% as on March 31, 2014. This, along with 16.97% held by foreign investors through American depository receipts (ADRs) and global depository receipts (GDRs), take the foreign holding to 73.69%.
Speaking on the sidelines of an event, Puri said: We have got legal opinion from a Chief Justice and a Supreme Court judge and we believe that since HDFC's holding was there in HDFC Bank prior to a law being passed about a deemed foreign company, we wont be affected.
Puri added that HDFC should not be considered as a deemed foreign company as the shareholding was present earlier too and there is no retrospective application of law in India.
Since the FDI rules prescribe that banks need FIPB approval to increase its foreign shareholding from 49% to a maximum of 74%, HDFC Bank in December last year had sought its permission to raise it to 67.55%. The FIPB had had also given approval to Axis Bank in September to increase its foreign holding from 49% to 62%.
In December 2013, the Reserve Bank of India (RBI) had suspended fresh buying of HDFC Bank shares by FIIs after their stake had reached the 49% limit.