Carlyle may partially exit HDFC with 100% gains

Five years after its investment, private equity major Carlyle Group may exit a quarter of investment in mortgage lender HDFC Ltd.

Market buzz is that Deutsche Bank has opened a book for a block deal of 20 million HDFC shares on behalf of Carlyle. The cost of acquisition of these shares, which amount to 1.3 per cent stake in the company works out to Rs 692 crore. If the deal goes through at Tuesday’s close of Rs 696, these shares would fetch a whopping Rs 1,392 crore, meaning the fund has effectively doubled its investments in the five years.

As of December, CMP Asia Ltd, a Carlyle entity, owns 77 million or 5.22 per cent in HDFC. In May 2007, Carlyle had picked 15.25 million shares at Rs 1,730 apiece for Rs 2,638 crore. In August 2010, the shares were split 1:5.

Devinjit Singh, managing director of Carlyle India Advisors, however, could not be contacted for a comment. The fund, with globally manages $153 billion, invests from its $2.5 billion Asia focused fund, of which 60 per cent has been invested.

Earlier in the month, there was a similar buzz about Temasek and GIC — the two investment arms of the government of Singapore — were also looking at selling a part of their holdings in ICICI Bank, the country’s biggest private sector lender by assets, through stock market block deals. The funds had mandated JP Morgan to carry out the exercise. Temasek had 3.46 per cent stake in ICICI Bank through its unit Allamanda Invest-ments, while GIC owned 1.68 per cent stake in the lender as of December 31, 2011, shareholding data on the Bombay Stock Exchange (BSE) website showed.

GIC had reduced its stake in ICICI Bank by selling 1.59 million shares in the quarter ended December 31, 2011, according to the bank’s shareholding pattern.

Since last October Carlyle had been investing in Indian financial services companies and brokerages. First, it increased its stake to nine per cent stake in India Infoline and then followed it up by picking up 5.48 per cent in Edelweiss Financial Services the month after. This, despite the fact that Indian brokerages are facing a drop in cash market volumes and reduced investor appetite. “We do expect the retail broking industry to consolidate. At current levels of volumes and yields, the business models of smaller-sized brokerages are unviable,” Singh had told Business Standard then.

Typically, private equity firms look to unlock value between four to six years. Last year, Warburg Pincus, which held nine per cent in Kotak Mahindra Bank sold shares worth $245 million in tranches. The largest block deal in market's history was the offloading of 14.9 per cent of Cairn India stake by Malayasian oil giant Petronas, for about $2.1 billion to Vedanta, Cairn's current owner, and some other buyers.