Investment Management Department
E-mail : biswajitc@sebi.gov.in
Fax No. 91+22+26598518/14
Ref : IMD/BC/ 21889 /2004
September 28, 2004
HSBC Asset Management (India) Pvt. Ltd.,
52/60, Mahatma Gandhi Road,
Fort, Mumbai 400 001.
Dear Sirs,
Sub : Your request under the SEBI (Informal Guidance) Scheme, 2003.
By your request dated 13.8.2004 you had sought an interpretive letter under the captioned Scheme. You had inter alia represented as follows:
(a) The HSBC Group has through HSBC Asia Pacific Holdings (UK) Limited (HAPH), acquired 14.62% of the equity share capital of UTI Bank Limited (UTI Bank). AMIN, HSCI and HAPH are ultimately owned by HSBC Holdings Plc.
(b) The Reserve Bank of India (RBI) approval to the acquisition vide their letter no. DBOD No. PSBS 1175/16.01.127/2003-04 dated 26/5/04 itself states that this acquisition is in the nature of financial investment and HSBC Group should not have participation in the management of the UTI Bank nor any representation on the Board of UTI Bank. The letter further stipulates that UTI Bank will not enter into any agreement with HSBC on its management structure nor on any financial as well as operational collaborations without the approval of RBI.
(c) The Administrator of SUUTI holds 33.36% stake in UTI Bank and together with the co-promoters LIC and GIC (with GIC subsidiaries) hold more than 51% of the equity share capital of UTI Bank. It is therefore evident that Unit Trust of India controls UTI Bank which is not in any manner associated with the HSBC Group. Information on UTI Bank available to the HSBC Group is as any other public shareholder and from public sources.
(d) UTI Bank has informed AMIN vide their letter dated 9/8/04 that in their opinion, the requirements pertaining to ‘control’ and associate may not be applicable as
(i) Under Section 12(2) of the Banking Regulation Act, 1949, irrespective of the fact whether HSBC holds more than 10% of the shares in UTI Bank, the voting right is capped at 10% and
(ii) Even if it is admitted that HSBC holds more than 10% as per the RBI approval which permitted HSBC to hold shares in UTI Bank it has been clearly stipulated that the status of HSBC is that of a financial investor and it does not have the right to appoint a director.
(iii) Therefore, by no stretch of imagination can HSBCs holding in UTI Bank be deemed to be that of an associates holding.
In view of the above, you have sought a clarification that UTI Bank is not an associate of AMIN.
Our view
We note, as represented by you that the RBI has, while according its approval to the financial investment by HAPH in UTI Bank, imposed restrictions on the HSBC Group acquiring management control over UTI Bank. In view of the terms of approval granted by the RBI, we take the position that neither AMIN nor the HSBC Group have control over UTI Bank, within the meaning of regulation 2(g) of the SEBI (Mutual Funds) Regulations, 1996. It would therefore follow that UTI Bank is not an associate of HAPH or AMIN under regulation 2(c).
Accordingly, it is clarified that UTI Bank would not be an associate of AMIN for the purposes of the Mutual Funds Regulations.
This position is based on your letter dated 13th August, 2004 to the Investment Management Department (Division of Funds). Different facts or conditions might require a different result. This letter expresses the Division’s position on enforcement action only. It does not express decision of the Board on the questions presented.
Yours faithfully,
Biswajit Choudhury
ASSISTANT GENERAL MANAGER
Investment Management Department
E-mail : biswajitc@sebi.gov.in
Fax No. 91+22+26598518/14
Ref : IMD/BC/ 21962 /2004
September 29, 2004
HSBC Asset Management (India) Pvt. Ltd.,
52/60, Mahatma Gandhi Road,
Fort, Mumbai 400 001.
Dear Sirs,
Sub : Your request under the SEBI (Informal Guidance) Scheme, 2003.
Please refer our letter no. IMD/BC/21889/2004 dated September 28, 2004, on the captioned subject.
As proposed by you, you may also voluntarily disclose in all your offer documents, that, “HSBC Asia Pacific Holdings (UK) Limited holds 14.62% of the equity share capital of UTI Bank Limited as a financial investment and the HSBC Group has no management control or Board representation on UTI Bank Limited.”
You are also advised to keep us apprised if any change in holding or control status takes place.
Yours faithfully,
Biswajit Choudhury
ASSISTANT GENERAL MANAGER