Leading private equity funds and three foreign banks are in the race to pick Citi Group’s stake in India’s largest mortgage lender Housing Development Finance Corporation (HDFC).
“Singapore’s largest bank, DBS, the British bank, Standard Chartered, private equity players including Blackstone and Carlyle are evaluating options to buy Citi’s 11.74 per cent stake in HDFC,” investment banking sources said.
Citi’s investments in HDFC are held through two of its subsidiaries. Citigroup Strategic Holdings, the holding company of strategic assets, holds 9.11 per cent stake while a Mauritius arm called Citigroup Holding Mauritius holds another 2.63 per cent stake. As per Friday’s closing price of HDFC, Citigroup’s total investment is valued at Rs 6899 crore. HDFC shares went up 9.47 per cent to close at Rs 2068 at the BSE on Friday.
Spokespersons of Citi Group, Standard Chartered Bank and Blackstone declined to comment, while DBS did not respond to an e-mail questionnaire sent on Thursday.
On Thursday, HDFC chairman Deepak Parekh had told shareholders at the mortgage lender’s AGM that there were several takers for Citi’s stake.
The Citi Group has put its stake in HDFC on the block as part of a restructuring plan initiated by its Indian CEO Vikram Pandit. The plan, which is in the works, involves the sale of non-core assets worth $500 billion (approximately Rs 21,366 crore) over the next three years. Last week, the group had sold its German retail banking operation and some of its affiliates to France’s Credit Mutuel for $7.7 billion (Rs 32,905 crore). Unconfirmed reports state that some of its Indian assets are also up for sale.
Foreign banks and PE funds are queuing up for Citi’s stake as it would give them a substantial presence in India’s banking space. The deal will help DBS, for instance, to maximise its presence in Indian market.
The Singapore bank has just two branches in India –one each in Delhi and Mumbai—since it started operations here in 1994. Recently, it got a nod from RBI to open eight more branches in India. The bank has formed a joint venture with Cholamandalam group and has NBFC operations in 200 locations. The group is planning to expand its India operations in a big way.
The Carlyle group is holding a significant minority stake of 5.6 per cent stake through its Asia investment arm, Carlyle Asia Partners. “The acquisition of Citi’s stake will give large private equity players like Carlyle and Blackstone a strategic advantage in India’s banking space,” said a banker. In April, Standard Chartered announced it would invest over $250 million (Rs 1,068 crore) to expand its India operations. Blackstone is also looking for a significant investment opportunity in the banking space.