Bloomberg News

HDFC Drops After Citigroup Sells Entire Stake: Mumbai Mover

February 24, 2012

(Updates with closing share price in fourth paragraph.)

Feb. 24 (Bloomberg) -- Housing Development Finance Corp. fell the most in four months after Citigroup Inc. sold its remaining 9.9 percent stake in India’s largest mortgage lender.

The U.S. bank sold 145.3 million shares of the Mumbai-based company for 95.5 billion rupees ($1.95 billion), or 657.56 rupees apiece, it said in a statement today. The sale represents a discount of 6.2 percent to the stock’s closing price yesterday.

“The share performance is just because of a knee-jerk reaction to the stock being sold at discount in today’s block deal,” said Alex Mathews, head of research at Kochi, India- based Geojit BNP Paribas Financial Services.

HDFC fell 3.6 percent at 676.4 rupees at close in Mumbai. The mortgage lender had climbed 7.6 percent up to Feb. 23, compared with a 17 percent gain in the benchmark Sensitive Index this year.

Citigroup joins European and U.S. banks including HSBC Holdings Plc and Goldman Sachs Group Inc. in selling Asian assets as global rules for higher risk buffers force lenders to boost capital. Citigroup, the third-largest U.S. bank by assets, also plans to raise as much as $20 billion in debt this year to make payments on a 2008 emergency credit program.

Difficult Markets

“Banks globally are currently under pressure to boost capital, and asset disposals make sense as the current environment makes fundraising from capital markets difficult,” said Lewis Wan, Hong Kong-based chief investment officer at Pride Investments Group Ltd., which manages $250 million of assets. “The fundamentals of U.S. banks and European banks are relatively weaker than that of Asian banks.”

Citigroup said in June it was reducing its stake in Mumbai- based HDFC to 9.9 percent, from 11.4 percent, in preparation for meeting Basel III capital rules. Today’s sale is part of Citigroup’s ongoing capital planning efforts, it said in a statement. The bank managed the latest share sale itself.

“The demand for HDFC shares in today’s sale was very strong and that clearly indicates the appetite among investors for the stock,” said Mathews. India’s central bank may reduce interest rates and HDFC’s home loans-business stands to benefit, he said.

--Editors: Chitra Somayaji, Abhay Singh

To contact the reporters on this story: Ruth David in Mumbai at rdavid9@bloomberg.net; Sam Nagarajan in New Delhi at samnagarajan@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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