Citigroup to sell 9.9% stake in HDFC for up to $2.1 billion

Citigroup Inc plans to raise up to $2.1 billion by selling its entire stake in India's Housing Development Finance Corp (HDFC) on Friday, three source with direct knowledge of the deal told Reuters. 

Citigroup has launched the process to sell about 145 million shares, or a 9.9 percent stake, in HDFC for between 630 rupees and 703.55 rupees per share, said the sources, declining to be named as the deal is not public yet. 

Shares in India's top mortgage lender HDFC, which has a market value of $21 billion, ended down 0.1 percent at 701.30 rupees in a weak Mumbai market ahead of the news. 

The lower end of sale price range represents a discount of 10 percent to HFDC's Thursday close. Citi is the sole bookrunner for the deal, the sources said. 

HDFC Chief Executive Keki Mistry told Reuters the company had been informed about the launch of the deal by Citi, but declined to give details. A spokesman for Citigroup in India declined to comment. 

Citi is the largest shareholder in HDFC, and one of the sources said the US bank was selling the stake to shore up its capital to meet new global banking rules. Citi sold a 1.5 percent holding in HDFC in June last year in a deal that the bank said would give it a pre-tax profit of $160 million. 

The third-largest US bank by assets bought just under 10 percent of HDFC in 2006 for about 29 billion rupees ($589 million) and subsequently added to its stake, to become the lender's top shareholder with a 11.37 percent holding. 

Shares of financial institutions have led the rally in the BSE's Sensex since the beginning of the current year and many a foreign institutional investor are said to be seizing upon the opportunity and selling their stakes. 

This is the second stake sale by foreign funds in the mortage leader in this month alone. On February 2, Carlyle sold 1.3 per cent of its stake in HDFC for about USD 270 million (Rs 1,354 crore). 

The same day Warburg Pincus sold about 17.5 million shares in lender Kotak Mahindra Bank through stock market deals to raise about USD 170 million. 

A week later, on February 8, Temasek Holdings, the state investment group of Singapore, sold 1.4 per cent of its stake in India's largest private lender ICICI Bank for USD 299 million, signaling that the foreign investors are using the massive rally in the Sensex as an exit opportunity. 

After shedding a whopping 25 per cent in 2011 calender, thereby becoming the worst major index across the globe, both the Sensex and Nify have gained over 17 per cent till date in 2012. This massive and unexpected bull-run has been driven in part by the banking stocks. 

India's main stock market index is up nearly 17 percent so far this year, mainly led by financial stocks.