Bank Muscat, the largest lender in the Sultanate of Oman, has sold around 0.85% of its 2.13% stake in India’s second largest private bank HDFC Bank. Bank Muscat is now looking to sell out completely to generate cash to account for bad loans in its books and drop in value of investments following the global credit crisis. Banks in the Middle East have also been hit by sharp drop in price of crude oil.
The bank has said in a statement on the Muscat Securities Market, "We decided to sell our stake in HDFC Bank, India over a period of time." It has also added that 40% of its holding has already been sold off.
As of December 31, 2008 Bank Muscat held 2.13% in HDFC Bank representing 9.05 million shares. At the price of Rs 825 (the closing price of HDFC Bank on BSE on Tuesday), this stake is valued at Rs 742 crore ($145 million).
Over the last two and half months Bank Muscat has sold around 3.62 million shares. Given the average share price of the Indian bank when volumes traded were high between January and March it could have cashed out around Rs 300 crore.
HDFC Bank, which is promoted by HDFC, also has other large shareholders such as LIC, Singapore’s DBS Bank, ICICI Prudential Life Insurance Co among others.
Bank Muscat accounts for 20% of the overall market cap of Muscat Securities Market. Shares of the bank has surged with speculation that it may sell its stake in HDFC Bank this quarter end itself, though the bank has not stated by when it would sell out its remaining stake.
HDFC Bank’s scrip which touched its one year low of Rs 774 early this month is now trading at around Rs 825. Last week it saw major traded volume spike which is when Bank Muscat is estimated to have offloaded part of its holding.
Bank Muscat's profit has dropped 83% in the fourth quarter of 2008 due to impairment losses related to an investment in Pakistan's Saudi Pak Commercial Bank.
Bank Muscat had picked equity at HDFC Bank in February 2008, after the Indian lender acquired and merged Centurion Bank of Punjab with itself. Bank Muscat was one of the key shareholders of Centurion Bank. An year ago, Bank Muscat had said it had no plans to sell any stake in HDFC Bank.