Citigroup to cut stake in HDFC in $260-300 mn deal

To meet new regulatory norms, lender plans to reduce stake to below 10%.

Citigroup is likely to reduce its stake in Housing Development Finance Corporation (HDFC) to below 10 per cent, according to three people familiar with the development.

“This is because of the new adequacy norms proposed under Basel III guidelines,” said one source.

Citi, currently the single largest institutional shareholder in HDFC, holds a stake of 11.38 per cent in the housing finance company through Citigroup Strategic Holdings Mauritius and Citigroup Holdings Mauritius.

The estimated size of the stake that Citigroup plans to reduce is $260-300 million and the transaction may happen as early as tomorrow, the sources said.

HDFC’s market capitalisation is estimated at Rs 96,521 crore, or $22 billion, considering Monday’s closing price of the HDFC scrip. HDFC shares closed at Rs 657 on the National Stock Exchange on Monday. Market capitalisations of ICICI Bank and HDFC Bank are currently pegged at Rs 119,733 crore and Rs 110,639 crore, respectively.

Market analysts said there was a sudden rise in the interest on HDFC shares among institutional investors in the past few days.

“Institutional desks of various brokerages were abuzz with HDFC blocks for quite some time. However, the names of the sellers were not widely known earlier,” said a senior official at a foreign brokerage.

While Citi officials declined to comment on the issue, HDFC officials were not immediately available for comments.

Citigroup Global Markets Mauritius had earlier sold around 74,000 HDFC shares at Rs 2,700-2,900 per share through block deals. In August 2010, HDFC had announced a five-for-one stock split to enhance liquidity in its shares.