10 facts on Citi's stake sale in HDFC
Citi will get $1.9 billion from the transaction at the current exchange rate, resulting in a pre-tax gain of $1.1 billion (Rs 5,490 crore), and an after-tax gain of approximately $722 million (Rs 3,550 crore).
Shares of Housing Development Finance Corporation Ltd. (HDFC) traded 4.5 per cent lower at Rs 670.10 on the National Stock Exchange at 1330 hours today. In contrast, the Nifty index traded 0.75 per cent or 41 points lower at 5,442. Selling pressure was witnessed in the counter on the back of a block deal by Citigroup.
Here are the 10 important facts about the block deal:
1) Citigroup Inc. sold its 9.85% stake in HDFC. A total of 145.3 million shares were sold.
2) The average price for one share was Rs 657.56.
3) Citi will get $1.9 billion from the transaction at the current exchange rate, resulting in a pre-tax gain of $1.1 billion (Rs 5,490 crore), and an after-tax gain of approximately $722 million (Rs 3,550 crore).
4) Citi had earlier sold 1.6% stake in HDFC in June 2011.
5) Citi sold its stake because it needed additional capital under Basel 3 norms. Basel 3 is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk. It was developed in response to the deficiencies in financial regulation revealed by the late-2000s financial crisis.
6) Other foreign banks like HSBC and Goldman have also been exiting assets not seen as "core". Citi's investment in HDFC was largely financial and the ability to convert HDFC investment to a strategic investment was limited.
7) The book was oversubscribed 2-2.5 times indicating the strong demand for HDFC, which is India's top mortgage lender.
8) Foreign investors like Aberdeen Asset, Capital International, Fidelity, JPMorgan, Ontario VC Fund and Temasek bought shares from Citi. Domestic investors like ICICI Prudential also bought shares.
9) "Citi selling its stake has nothing to do with the company. The capital requirement of American banks has been increased and because Citi needs to shore up their capital, they have sold their stake. The good thing is the entire stake has been sold in one go, so there is no overhang and the other good thing is the demand for such a large issue was high," Keki Mistry, Vice Chairman & MD of HDFC told NDTV Profit today.
10) "We are pleased with the results of our investment in HDFC and will continue to value our long-standing relationship with the company. Citi remains deeply committed to India and we continue to focus on growth opportunities for our franchise in this very important market,” said Pramit Jhaveri, Chief Executive Officer of Citi India.