The Hindu : Business : HSBC to infuse $180 m in India operations

Online edition of India's National Newspaper
Friday, Mar 11, 2005

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Business

HSBC to infuse $180 m in India operations

By Our Special Correspondent

MUMBAI, MARCH 10. The Hongkong and Shanghai Banking Corporation Limited (HSBC) has allocated $180 million to support its fast-growing Indian operations. This is being done through an infusion of $150 million in new capital as well as through $30 million in retained profits generated by the Indian operations during the year ended March 31, 2004.

The fresh infusion of funds, to be injected this month, would increase the capital adequacy ratio of its Indian operations to 13.5 per cent from 10 per cent at the end of December 2004.

The allocated funds will be used to support the growth of HSBC's fast growing retail banking and commercial banking operations in India. The bank's home loan portfolio during the current financial year has risen by 85 per cent, while credit cards in force have improved by 28 per cent.

"India, along with China, Brazil and Mexico, has been identified by the HSBC Group as one of the markets where we see strong growth over the next few years. Our Indian operations have demonstrated strong organic growth and the additional capital is expected to support our `Managing for Growth' strategy," said Niall S. K. Booker, Group General Manager and CEO of HSBC in India.

This is the second tranche that HSBC has infused into its Indian operations in 24 months. In March 2003, it injected $150 million.

HSBC India is at present having 39 branches and 150 ATMs. It has a credit card base of eight lakh customers and is one of the leading credit card merchant acquirers in the credit cards industry.

Stake in UTI Bank

PTI reports:

HSBC is in discussion with the Reserve Bank of India on the status of its investment in UTI Bank while its stake in the private sector bank will come down to 12.5 per cent after completion of the Global Depository Receipts issue.

"We are talking to the RBI on investment in UTI Bank,'' Mr. Booker said when asked about the status of the foreign bank's 14.58 per cent stake in the private sector bank.

He declined to divulge the details of the discussion under way with the banking regulator on the investment in UTI Bank.

Asked if HSBC is open for investment in any financially weak bank, a candidate selected by the RBI for restructuring, Mr. Booker said it was too early to say anything as such a decision had to make economic sense when sizable investments were involved. This assumed significance in the light of RBI's recent guidelines for foreign investment in the Indian banking sector. Mr. Booker also hinted that HSBC would not participate in the proposed GDR issue of UTI Bank and its stake in expanded capital would decline to 12.5 per cent.

The stake in UTI Bank is a good financial investment as well since shares were bought at Rs. 90 and the current market price is about Rs. 257 per share, HSBC India Deputy Chief, Naina Lal Kidwai, said.

Technically it is possible to participate in the UTI Bank's overseas offering, subject to RBI approval, but that would increase the average cost of purchase, she added.

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