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Foreign stake prop for Axis

New Delhi, Dec. 26: The government today approved a proposal from Axis Bank to hike its foreign equity holding to 62 per cent from 49 per cent, involving an inflow of about Rs 7,250 crore.

The approval by the Cabinet Committee on Economic Affairs (CCEA) comes with a rider. “(The approval) is subject to the aggregate foreign institutional investor holding not exceeding 49 per cent of the paid-up equity share capital of the bank,” an official statement said

Axis Bank, the third-largest private lender in India, had to seek the government’s permission after it breached the foreign investment limit of 49 per cent.

The foreign shareholding in Axis Bank had touched 52.18 per cent of the paid-up capital, prompting the RBI to ban the further sale of shares to foreign institutional investors.

After the hike in stake by foreign investors, Axis Bank will technically become “foreign-owned”, which means all future investments in its seven subsidiaries will be governed by the FDI policy, according to analysts.

According to the FDI policy, downstream investment by an Indian company, “which is not owned and/or controlled by resident entities in another Indian company will be in accordance or compliance with the relevant sectoral conditions on entry route”.

The bank’s seven subsidiaries are Axis Capital, Axis Finance Pvt Ltd, Axis Private Equity Ltd, Axis Trustee Services Ltd, Axis Asset Management Company, Axis Mutual Fund Trustee Ltd and Axis UK Ltd.

The promoters of the bank include Life Insurance Corporation, General Insurance Corporation, New India Assurance, National Insurance Company and Administrator of Specialised Undertaking of the Unit Trust of India (SUUTI). These firms continue to have boardroom control over the bank.

The government, which holds a stake in the bank through SUUTI, owns about 20.7 per cent in the bank.

Shares of Axis Bank today rose over one per cent on the bourses. On the BSE, the stock rose 2.79 per cent in intra-day trade to Rs 1,318.45 before closing at Rs 1,298.2, up 1.21 per cent. On the NSE, the stock settled 1.33 per cent higher at Rs 1,300.

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