Singapore’s state-run investment groups have been given the go-ahead to increase their holdings in India’s largest private sector financial institution, ICICI Bank, beyond the normal ownership limits for foreign groups that are controlled by the same shareholder.
The Reserve Bank of India on Monday told the Financial Times it would approve of any move by the pair – Temasek and government of Singapore Investment Corporation – to increase their respective shareholdings to 10 per cent.
This represents an exemption to the usual rule that limits foreign investors controlled by the same entity to acquiring a total stake in an Indian bank of up to 10 per cent.
Temasek has a 7.37 per cent stake in ICICI, while GIC owns 2.24 per cent.
Any exemption could raise eyebrows among foreign investors not just in the banking sector but in other industries, such as telecoms, in which overseas buyers have faced strict controls on how much they can acquire of domestic companies.
Vodafone of the UK was grilled for weeks by the government this year over whether its plan to buy a controlling stake in domestic mobile operator Hutchison Essar conformed with foreign ownership limits.
The news on Temasek and GIC comes as ICICI is holding the largest share offering by an Indian company – a $5bn domestic and international follow-on issue that would provide a prime opportunity for the two Singaporean agencies to increase their stakes.
The share sale by ICICI is part of a wave of record-sized offerings by Indian companies including the country’s biggest domestic IPO, a $2.25bn listing by property developer DLF, and the nation’s biggest overseas listing, a $2.1bn issue by miner Sterlite Industries, which was to be priced in New York overnight.
The RBI said on Monday that Temasek and GIC would need to buy the shares in ICICI first, according to the usual procedure, after which the central bank would approve the purchase.
The central bank had conveyed to the two agencies its intention to approve such a transaction, a spokesperson at the RBI said.
However, a Temasek spokesperson on Monday declined to comment and a spokesperson at ICICI said that he was unaware of any notification from the RBI of the decision. The GIC was unavailable for comment.
Meanwhile, a person familiar with the situation at the Reserve Bank of India said on Monday that he move was a “one-off” reached as part of India’s bilateral trade agreement with Singapore known as the Comprehensive Economic Co-operation Agreement (Ceca).
