The People's Bank of China (PBOC) is expanding its investment portfolio in India, holding shares in 35 companies valued at ₹40,000 crore by FY24's end. Key investments include ICICI Bank (₹6,139 crore), HDFC Bank (₹5,344 crore), and Infosys (₹5,303 crore). Despite geopolitical tensions and regulations like 'Press Note 3', PBOC's approach underscores a strategic economic engagement. Recent Sebi mandates address concerns over Chinese investments, while 17 Chinese-affiliated FPIs operate in India, highlighting a complex yet evolving relationship.
The People's Bank of China (PBOC), the central bank of the world's second-largest economy, is strategically enhancing its investment portfolio in India, despite ongoing geopolitical tensions between the two nations. Recent data compiled by Moneycontrol from filings with the Ministry of Corporate Affairs (MCA) reveals that PBOC holds shares in at least 35 Indian companies, amounting to an impressive portfolio valued at approximately ₹40,000 crore at the close of FY24.
Leading the way in PBOC's Indian investments is ICICI Bank, where the central bank's stake is worth ₹6,139 crore. Following closely are HDFC Bank and Infosys, with investments valued at ₹5,344 crore and ₹5,303 crore, respectively. The PBOC also has a significant stake of ₹1,414 crore in Power Grid Corporation, a government-promoted entity.
This development is noteworthy as PBOC's involvement was first noted in the shareholding pattern of the former HDFC (now merged with HDFC Bank) during the pandemic in 2020. At that time, concerns arose regarding Chinese investments in India, prompting the Indian government to introduce 'Press Note 3', which requires Chinese investors to obtain government approval for investments in unlisted companies. However, there are no restrictions on investments in listed firms. The Securities and Exchange Board of India (Sebi) has previously highlighted potential risks associated with the foreign portfolio investor (FPI) route, which some Chinese investors might use to sidestep these regulations.
Among PBOC's top investments, TCS stands out with shares worth ₹3,619 crore. Other notable investments include Kotak Mahindra Bank, Hindustan Unilever, and Bajaj Finance, each exceeding ₹1,500 crore in market value. Additionally, the central bank has invested over ₹1,100 crore in well-known brands like Maruti Suzuki, Tata Motors, and Ultratech Cement.
PBOC's journey in ICICI Bank began with a modest ₹15 crore investment during a qualified institutional placement in 2020. Since then, it has expanded its stake to 0.67% of the bank's equity.
Interestingly, data indicates that PBOC does not hold more than 1% in any of its Indian portfolio companies, adhering to Sebi's disclosure rules that require listed companies to reveal shareholders with over 1% equity. Annual returns filed with the MCA also require companies to disclose major foreign investors, with a deadline of November 30 each year.
In a recent circular dated August 24, 2023, Sebi mandated that certain FPIs disclose detailed information about their beneficial owners, reflecting concerns about the potential misuse of the FPI route by Chinese investors. The circular expressed that while Press Note 3 does not apply to FPI investments, significant portfolios could disrupt the stability of Indian securities markets.
Furthermore, Sebi proposed a framework on July 30, 2024, to categorize FPIs based on the proportion of their Chinese investors, designating those with over 50% investors from China as Land Bordering Country (LBC) entities. No final rules have been established yet.
Currently, 17 FPIs registered in India are affiliated with China, including the government-owned Best Investment Corporation and the Asian Infrastructure Investment Bank. Best Investment Corporation, managed by China's sovereign wealth fund, holds shares worth ₹800 crore in prominent companies like Infosys and Power Grid.
In summary, while the geopolitical landscape between India and China remains intricate, PBOC's increasing investment in Indian businesses reflects a nuanced approach to fostering economic ties.
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