Shares of mortgage lender Housing Development Finance Corporation (HDFC) fell as much as 6.0% in early trade on Friday at the Bombay Stock Exchange (BSE) before closing the day at Rs 676, down by 3.5% after Citigroup sold 145.3 million shares through block deals at Rs 657.56 a share. The sale is expected to result in a gain of $1.1 billion before tax and about $722 million after tax for Citi.
“We have been very happy with Citi as shareholders, but at the end of the day, there was always that overhang that at some point of time Citi would need to sell shares to shore up their own capital requirements,” said Keki Mistry, vice-chairman and CEO, HDFC.
Citi held 9.9% stake in HDFC, which it sold for $1.9 billion (around R9,327 crore) in order to shore up its capital base.
“The sale of Citi’s remaining stake in HDFC is part of Citi’s ongoing capital planning efforts,” Citigroup said in the statement. “Total proceeds from the transaction are expected to be $1.9 billion at the current exchange rate,” it added.
The shares were bought by a large number of global funds as well as some local financial institutions, according to sources.
This is the second time within a month that a significant shareholder has pared its stake in HDFC. On February 1, Carlyle Group sold about a quarter of the 5.6% stake it held in the mortgage lender for $273.4 million.
Citigroup joins European and USbanks including HSBC Holdings and Goldman Sachs in selling Asian assets as global rules for higher risk buffers force lenders to boost capital.