Citigroup Inc. said that it has sold 145.3 million shares in Housing Development Finance Corporation Ltd. (HDFC) through the National Stock Exchangeon Friday, representing the entirety of its 9.85 per cent interest, for Rs.657.56 per share.
“Total proceeds from the transaction are expected to be $1.9 billion at the current exchange rate, resulting in a pre-tax gain to Citigroup of $1.1 billion (Rs.5,490 crore), and an after-tax gain of approximately $722 million (Rs.3,550 crore),” Citigroup said.
There was a huge demand for the issue sale at around 2 to 2.5 times as per the market sources, said Keki Mistry, Vice-Chairman & CEO, HDFC. This massive demand reflected the fact that foreign institutional investors (FIIs) are looking at Indian financials in a big way, Mr. Mistry added.
The shares were bought by a large number of global funds, including UBS, Vontobel, Oppenheimer and Templeton as well as some local financial institutions, according to market sources.
The price represents a discount of about 6 per cent to HDFC's closing price (Rs 701.30 per share) on Thursday, when Citi launched the process to sell its HDFC stake. Citigroup had invited bids of between Rs 630 and Rs 703.55 per share as per its term sheet.
HDFC is a leader in housing finance, with an asset base of $ 27.6 billion as of December 31, 2011. As a leading financial conglomerate, HDFC has interests in banking, insurance, asset management and property funds. The sale of Citi's remaining stake on Friday in HDFC is part of Citi's on-going capital planning efforts. “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. “Our combination of unique experience, deep relationships and valuable local insights provide us with strong competitive advantages.”
The Citigroup is having a stake of 9.85 per cent in HDFC through Citigroup Holdings Mauritius Ltd (1.07 per cent) and Citigroup Strategic Holdings Mauritius Ltd (8.78 per cent). Citi group was the largest shareholder in HDFC. Citi sold a 1.5 per cent holding in HDFC in June last year in a deal that the bank said would give it a pre-tax profit of $160 million.
Citi group bought just under 10 per cent of HDFC in 2006 and subsequently added to its stake, to become HDFC's top shareholder with a 11.37 per cent holding.
Today, Citi is one of the largest foreign banks in India employing nearly 8,000 people and is integrally connected to the trade and capital flows in the region touching 16 per cent of nationwide foreign exchange flows and 8 per cent of trade flows.