If this report is to be believed, Citigroup is in talks with an Oman private equity firm to sell its stake in Indian housing loan provider Housing Development Finance Corporation (HDFC). UTVi reported that Citi is in talks with Oman Investment Corporation (OIC) to sell its 11.75 per cent holding in HDFC. The report added that the talks are at a “fairly advanced stage”, and an announcement is expected soon.
Citi may be able to garner about $1.5-2 billion from the sale of the stake.
Citigroup had picked up 9.27 per cent stake in HDFC for around $671 million in May 2006 from Standard Life, HDFC’s JV partner in in the its insurance business HDFC Standard Life. Citigroup had also picked up an additional 0.97 per cent stake in HDFC for about $117 million last year.
These were issued at Rs 1,730 a share. The other 2.63 per cent is held by Citigroup Holdings Mauritius Ltd. It is the biggest institutional shareholder in HDFC. Carlylye Group also has 5.6 per cent stake which it picked up with Citigroup in 2007 for $650 million. Other major share holders in HDFC include CMP Asia (5.37%) and DB International (Asia) (4.20%).
Oman Investment Corporation (OIC) is a private equity investment company jointly held by Gulf Investment Corporation, the Government of Oman, National Investment Funds Company, and Bank Muscat. The company has investments in infrastructure, energy and financial services.
Why Citi Is Selling
The deal is part of Citigroup’s global asset raising and restructuring drive that has already seen the group spin-off operations in some sectors, and initiate job cuts worldwide as it looks to raise up to $400 billion through asset sales.
Citigroup is going through what its newly appointed head Vikram Pandit calls “re-engineering” of the business. The company is planning to lay-off 18,000 workers by end of this year. He has told investors that he can take $15 billion of costs out of the company, with the first chunk coming through job cuts added the report.
Since the sub-prime crisis erupted last year, the group has posted write-downs around $40 billion. It is expected to add a further $8 billion in the second quarter results, which are to be announced on July 18. Citigroup has already raised more than $50 billion in recent months to shore up its balance sheet.
HDFC’s key associate and subsidiary companies include HDFC Bank, HDFC Standard Life Insurance Company Ltd, HDFC Chubb General Insurance Company, HDFC Asset Management Company, HDFC Venture Capital Ltd, and Intelenet Global Services Private Ltd.