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Sovereign Funds Of Abu Dhabi & Singapore Bet Over $650M On HDFC Bank

02 February, 2012

World’s largest sovereign wealth fund Abu Dhabi Investment Authority (ADIA) has quietly acquired close to 2 per cent stake in HDFC Bank Ltd, the country’s most valued private lender, in what could have cost it around Rs 2,000 crore ($400 million), according to VCCircle estimates.

ADIA did not figure among HDFC Bank’s shareholders owning over 1 per cent stake as of September 2011, but held 1.94 per cent as on December 31, 2011. Although it could have acquired around half of its stake before October without having to make a disclosure, it might have made the bulk of its purchase during the last quarter when the average share price of HDFC Bank was in the range of Rs 400-Rs 500 a share.

HDFC Bank scrip was quoting at Rs 484.55 a share, down 1.2 per cent in mid-day trades on the BSE on Wednesday, but ended the day at Rs 496.7 a share, up 1.18 per cent.

HDFC Bank reported 31 per cent rise in its net profit for the quarter ended December 31, 2011, beating market forecasts.

ADIA invests out of the surplus earned from the oil business of the government of Abu Dhabi, which is part of the UAE. Its assets under management are worth over $600 billion, making it the world’s largest sovereign wealth fund, according to data compiled by the Sovereign Wealth Fund Institute.

A year ago, ADIA also invested in ICICI Bank, India’s largest private lender by assets, but it either diluted its holding below 1 per cent level or exited completely in mid-2011.

The sovereign wealth fund recently said it was looking at more investments in India and in the last quarter, marginally raised its holding in Dr Reddy’s Labs – from 1.72 per cent in September 2011 to 1.77 per cent at the end of December 2011. During the same period, it cut its stake in LIC Housing Finance from 1.64 per cent to 1.45 per cent.

Last year, ADIA also made a small investment in gold loan company Muthoot Finance, co-investing with Citigroup Global Markets, Goldman Sachs India Fund and Baring India Private Equity Fund as anchor investors in the company’s IPO.

But for ADIA, HDFC Bank could be the single largest bet in India and among the biggest by any alternative asset fund house in India’s financial sector in recent times. Among others, KKR and IFC invested in Magma Fincorp while Carlyle invested in India Infoline and Edelweiss.

Singapore Govt Spreads Investments In Indian Financial Sector

Another large investor who placed a bet on HDFC Bank is Singapore’s sovereign wealth fund. The government of Singapore (which operates through two funds GIC and Temasek) has apparently acquired 1.2 per cent in HDFC Bank last quarter in what could have cost it around Rs 1,250 crore ($250 million).

This investment is interesting since Singapore’s sovereign wealth fund already has a large exposure in ICICI Bank. The government of Singapore held over 9 per cent stake but had been slowly diluting its stake. As of December 2011, it held a little over 5 per cent in ICICI Bank.

Both ADIA and Singapore’s sovereign wealth funds had earlier suffered heavy losses with the drop in portfolio value after placing multi-billion-dollar bets on large US financial services firm such as Citigroup and Merrill Lynch. The investments got singed in the aftermath of the financial crises in the West that led to sharp downgrading of financial services companies and banks.


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Sovereign Funds Of Abu Dhabi & Singapore Bet Over $650M On HDFC Bank

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