Carlyle exits HDFC for $840M, makes over 2x

Private equity major the Carlyle Group has sold its entire stake in India’s largest mortgage lender Housing Development Finance Corp (HDFC) in one of the largest exits in country's PE history. The buyout giant sold 3.7 per cent stake in HDFC on Friday for $840 million (Rs 4,338 crore), bringing the shares of the firm down by nearly 5 per cent.

With this exit, Carlyle has made over $1.11 billion on its $650 million investment made over five years ago in 2007. While in rupee terms the deal gives Carlyle a 2.16x multiple, in dollar terms it comes to 1.71x reflective of the fall in the Indian currency (when Carlyle bought the stake rupee was around 40 per dollar).

Carlyle had purchased 5.22 per cent stake in HDFC, a part of which was sold in February this year for $271 million or Rs 1,355 crore.

The shares of HDFC closed at Rs 749.65, down by 4.89 per cent on a day when Mumbai markets were down 0.63 per cent. Carlyle’s average investment price comes at Rs 344 per share. The latest sale was at Rs 761.08 per share, as against Rs 677.21 a share in the February sale.

Earlier this year, global banking major Citigroup Inc. also exited HDFC by selling its 9.85 per cent stake for over Rs 9,551 crore or $1.9 billion.

The deal joins the list of some of the largest exits in India. Earlier this year, General Atlantic and Oak Hill Capital Partners sold 30 per cent in business process outsourcing (BPO) firm Genpact for $1 billion to Bain Capital. The two PE firms have made $1.62 billion (this includes Bain deal, special dividend and market sales) and still hold 10 per cent stake.

Warburg Pincus also completed its exit from private sector lender Kotak Mahindra Bank Ltd, garnering over Rs 3,400 crore or $661 million, earlier this year.

The largest recorded exit in India is Warburg Pincus' investment in country's biggest mobile operator Bharti Airtel, where PE firm encashed $1.83 billion on its original $290 million investment in 2005.

For Q1FY13, HDFC reported a 19.1 per cent increase in net interest income to Rs 1304 crore with profit after tax up 18.6 per cent to Rs 1,001 crore on a year-on-year basis.

"HDFC’s superior execution skills and its ability to withstand competitive pressure without impacting core parameters and profit growth is commendable. We expect business growth to remain healthy driven by continued momentum in the individual home loan segment and healthy traction seen in housing demand in Tier II and Tier III cities. We model in loan CAGR of 20 per cent during FY12/14E," said a Motilal Oswal report with a target price of Rs 800.

(Edited by Prem Udayabhanu)

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