The Telegraph
Since 1st March, 1999
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Consolidation of HDFC will have to wait

Calcutta, Sept. 13: HDFC chairman Deepak Parekh wants to consolidate his group’s diversified businesses, which include insurance — both life and non-life — asset management and banking besides housing finance, into one entity, if regulatory approvals for such an integration come through.

Though it is Parekh’s vision to bring the financial conglomerate’s diverse businesses under one holding company, his plans may not materialise in the near future because of regulatory constraints. He also ruled out merger of HDFC Bank with HDFC in the foreseeable future.

“Ideally, we would have separate subsidiaries for different businesses, but one holding company. The subsidiaries would be wholly owned by the holding company, which would be listed on stock exchanges,” Parekh said.

It would not be possible to conceive such a structure now because of the “multiplicity of regulators”. “The National Housing Bank regulates our housing finance business, the Insurance Regulatory and Development Authority (IRDA) our insurance subsidiaries, and Securities and Exchange Board of India (Sebi) our mutual fund.

“Till the regulatory framework in our country is simplified, we cannot have the structure we want. We will have to wait till the regulators converge. They have done so world wide, allowing conglomerates to consolidate, and that should happen in India as well,” Parekh said.

In the hypothetical situation of HDFC merging all its group firms with itself and becoming the principal holding company, a large number of foreign financial institutions would acquire significant equity stakes in it. These include Standard Life Assurance Company, Chubb Corporation and Chase Manhattan Bank, among others.

Standard Life holds 10 in HDFC Ltd and 26 per cent apiece in the life insurance venture and the asset management company. Chubb Corporation is HDFC’s partner in the general insurance business.

Chubb holds 26 per cent in the general insurance arm, whereas Chase Manhattan Bank controls 15 per cent in HDFC Bank. Besides these financial institutions, foreign institutional investors (FIIs) hold 48.28 per cent in the group flagship, which has a balance sheet of Rs 17,800 crore.

Buyout lull

Parekh said HDFC Bank had given up hopes of gobbling up a private bank, Parekh said. It had examined all takeover targets, including Nedungadi Bank, and had abandoned its acquisition ambitions. “It is better to grow organically. All banks that are on the block are too costly for us. So, for the time being, we have decided to focus on organic growth only. Our current growth rate is healthy, and we are comfortable with it.”

“All acquisitions look expensive in hindsight,” he said with a touch of humour.

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