FTSE Says HDFC Bank’s Weightage In Its Indices To Increase In 3 Tranches

After the merger of the parent company Housing Development Finance Corporation, the investing weight of HDFC Bank in the FTSE Emerging All Cap index increased from 0.81% to 1.52%. FTSE Russell, the index aggregator, announced that this weightage would be implemented gradually in three tranches before March 2024. 

FTSE stated that the investability weight adjustments for HDFC Bank in the FTSE Emerging All Cap index will be executed in three phases. 

The first tranche will be implemented during the index review in September, the second during the review in December, and the last tranche will take effect during the review in March. 

FTSE Russell has mentioned that due to the projected increase in shares in issue and free float update, HDFC Bank’s weighting in the FTSE Emerging All Cap Index is expected to rise from its current level of 0.81% to 1.52%.  

Considering client feedback regarding the substantial size of this projected up weight and its potential impact on the company’s foreign headroom, FTSE Russell has decided to implement the shares in issue and free float update gradually in multiple stages during the reviews in September, December, and March, as stated in their release. 

FTSE Russell will evaluate HDFC Bank’s eligibility during the September 2023 index review, considering factors such as shares outstanding, free float, and foreign headroom.  

According to information that was made publicly available as of the shares and free float cut-off date on July 31, 2023, HDFC Bank has 7,544,951,154 shares outstanding, a 74% investability weighting, and 18.3% foreign headroom, which satisfies the Section C of the Foreign Ownership Restrictions and Minimum Foreign Headroom Requirement’s requirements for the minimum amount of foreign headroom for an index constituent. 

To ensure the affected indices remain replicable, FTSE Russell proposes a gradual up weighting of HDFC Bank in three tranches, coordinated with the September 2023, December 2023, and March 2024 index reviews. However, the December and March tranches will be contingent upon HDFC Bank’s foreign headroom continuing to satisfy the minimum 10% headroom requirement, as stated in FTSE’s release. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.