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Citi Sells HDFC Stake For $1.9 Billion

Citibank has sold it’s 9.9% stake in HDFC (not the bank) at 657.6 rupees – with 14.5 crore shares sold today in a block deal. Buyers include FIIs and a TV report even mentioned Reliance Industries (their treasury ops).

The price is substantially lower than the Rs. 700 price on Thursday, but the stock has recovered to just 3.3% down at 677. If you’re wondering why CITI would sell for so much lesser, the dynamics of a stock sale are that you demand bids and you sell at those bids – you can’t afford to sell that stock in the retail market directly (the stock is likely to tank even more) and it seems bids were around the 645 range.

HDFC chart

The profit Citi makes is about $770 million which should work well for their own capital requirements.

Will the sale affect HDFC? At this point, it doesn’t seem like it. Keki Mistry has taken great pains to make the media understand that most buyers are FIIs and long-only funds (which means they might actually stick around for the longer term, and may not sell immediately). This should mean that stock price is safe from another round of selling.

The stock has been hanging around between 600 and 700, and growth has slowed a bit. The Q3 EPS was 6.56 versus 5.91 a year back, a 10% increase. Even with an EPS of  Rs. 28 for the full year, the P/E is still 24. A good part of the value, though, is for its ownership of HDFC Bank, the Mutual fund AMC and the Insurance business.

Disclosure: no positions.