SBI Funds Management has received RBI approval to increase stake in HDFC Bank to 9.99 per cent in six months. The investment will be made as part of the mutual fund schemes managed by SBI Funds Management.

The approval was granted on an application made by SBI Funds Management to RBI, according to the HDFC Bank statement, which added that the approval is subject to a few conditions.

The fund house was advised by RBI to acquire the major shareholding in the bank by November 15. Further, SBIFML must ensure that the aggregate holding in the Bank remains below 10 per cent of the paid-up share capital or voting rights of the Bank at all times, it said.

SBI Funds Management is the largest in the country with assets under management of ₹7.17-lakh crore as of March-end.

The fund house attempt to increase stake in HDFC Bank comes when it is on the verge of merging its subsidiary HDFC with itself and expectations are that there will be an investment outflow of $150-200 million in the merged entity.

Analysts’ take

Global index aggregator MSCI recently said it would be cut the weightage of merged HDFC entity to 6.50 per cent from 6.74 per cent.

Incidentally, HDFC is a part of the global MSCI index with a weight of 6.74 per cent, while HDFC Bank is not a part of the index.

Most analysts have predicted a buying opportunity in the stock if it falls due to cut in MSCI index weightage, particularly due to better prospects and strong performance posted by both the financial institutions.

HDFC Bank reported 21 per cent jump in March quarter consolidated net profit to ₹12,594 crore on 30 per cent increase in income at ₹57,159 crore. HDFC also logged 20 per cent growth in standalone net profit at ₹4,425 crore on 36 per cent increase in revenue at ₹16,679 crore.