Mumbai: Citigroup Inc has reduced its stake in leading mortgage lender Housing Development and Finance Corp Ltd (HDFC) by selling 1.5% to 9.9%, the US bank said on Tuesday in a media release.
The sale would lower Citi’s holding to 9.9% from 11.4%, and was done ahead of the adoption of Basel III capital rules.
“The transaction resulted in a pre-tax profit of approximately $160 million. Citi has no plans to sell any additional shares of HDFC. Reducing its holdings in HDFC to below 10% is part of Citi’s mitigation efforts ahead of the adoption of Basel III capital rules,” the bank said.
Basel III rules on banking discourage large holdings by banks in other financial institutions.
“We have been an investor in HDFC since 2005 and continue to have a very strong and productive relationship with its senior management team,” said John Gerspach, chief financial officer of Citigroup. “This transaction was motivated by our capital planning as we prepare for the implementation of Basel III, rather than strategic considerations.”
“Citi remains deeply committed to India and we continue to invest in our franchise in this very important market,” Pramit Jhaveri, chief executive officer of Citi’s India unit, said in the statement.
Shares in HDFC, which has a market value of more than $21 billion, fell as much as 1.8% after trade data from the Bombay Stock Exchange (BSE) showed a block deal 16.5 million shares at Rs643 each.
At 10:27 am, HDFC was down 0.8% at Rs651.95 after falling as low as 645.50 in a firm Mumbai stock market .
Citi bought just under 10% of HDFC in 2006 for about Rs2,900 crore and subsequently added to its stake, to become the mortgage lender’s top shareholder with 11.37% holding, according to Thomson Reuters data.
Reuters contributed to the story.