L&T Capital Company Ltd (LTCC), the investment arm of the L&T group, picked up a 4.68% stake in the Kochi-based Federal Bank Ltd. This makes L&T Group the fourth largest shareholder in one of the oldest private sector bank in the country with an annual income of close to Rs 3,000 crore. The other major stakeholders in the bank, as of the end of December quarter, are International Finance Corporation, Washington (4.99%), HSBC Financial Services Middle East (4.98%) and Emirates Financial Services Psc (4.74%). Federal Bank, incidentally, has no domestic or foreign promoters.
Federal Bank, in a regulatory filing on Friday said that LTCC has been holding 79,95,619 ordinary shares which translates into 4.68% of the voting capital of the bank. LTCC had picked Federal Bank shares from the open market between October 2008 and December 2008. Federal Bank stock was up by 9.88% on the National Stock Exchange on Friday, closing the day at Rs 155.75.
The stock had a yearly high of Rs 353.80 and a yearly low of Rs 110.15 at the NSE.
According to sources, Federal Bank has been attracting buying interest from institutional investors ever since ICICI Bank, the country?s largest financial institution by turnover, had decided to offload its stake in Federal Bank. ICICI Bank was holding over 20% stake in Federal Bank and another 12% stake in South Indian Bank (SIB). ICICI Bank had sold its entire holding in both the Kerala-based banks after the banking regulator, Reserve Bank of India (RBI), restricted cross-holdings in commercial banks a few years back.
According to analysts, Federal Bank has a relatively clean balance sheet and its business is growing at an exponential rate. The bank, which has a strong foothold in the southern market, is in the process of extending its footprint to other geographies including North, East and the West. ?It is a good investment for a financial institution like L&T Capital and as and when RBI and the finance ministry come out with a clear policy about the holding in banks, L&T would only stand to gain. Besides, Federal Bank has picked significant stakes in its peers in the past, which will bring good return in the future,? said an analyst with a local brokerage house, on conditions of anonymity. Federal Bank is holding 4.99% stakes each in South Indian Bank and Lakshmi Vilas Bank (LVB). Like Federal Bank, South Indian Bank does not have any domestic or foreign promoters, while the promoters? holding in Lakshmi Vilas Bank is less than 1%. Federal Bank with its close to 5% stake is incidentally the single largest shareholder in LVB.
Southern rhapsody
•Major stakeholders in Fedral Bank include International Finance Corporation, Washington, HSBC Financial Services Middle East and Emirates Financial Services Psc
• Bank has no domestic or foreign promoters
• LTCC picked Federal Bank shares from the open market between Oct-Dec 2008