Mumbai: If it is looking to raise money, embattled US banking services firm Citigroup Inc. could potentially look at equities worth at least $1.4 billion (Rs7,000 crore) in 67 Indian companies. But Citi won’t be able to liquidate its local stakes entirely as not all of these are proprietary holdings.
The valuation is based on a Mint assessment based on Citigroup’s local portfolio through end-September shareholding patterns of companies available on local bourses and at Friday’s closing prices. It is possible the holdings could have changed since then.
Also See: The Long List (PDF)
Speculation about the US bank selling some of its holdings has put pressure on its portfolio stocks in India after Citigroup announced job cuts last week, said the head of a domestic brokerage, who asked not to be named.
On Thursday and Friday, some Indian companies with significant exposure to Citigroup, such as Housing Development Finance Corp. Ltd (HDFC) and Educomp Solutions Ltd, saw selling pressure on speculation that the US bank was planning to liquidate its equity portfolio in India in a bid to raise money.
Citigroup, stressed by mounting debt from failed bets on the US mortgage market, has its biggest local holding in the country’s largest home loan provider HDFC, with an 11.74% stake worth Rs4,658.8 crore. This stake alone accounts for two-thirds of Citigroup’s investments in Indian companies.
On 17 November, Citigroup had announced at least 50,000 job cuts globally to shed weight, pushing its stock price to single-digit levels for the first time in 12 years.
On Saturday, Mint ran an article from The Wall Street Journal which said Citigroup executives had begun weighing the possibility of auctioning pieces of the firm or selling it outright.
The firm’s share price dropped one-fourth in US trading on Thursday, and skid to below $4 on Friday.
The head of the domestic brokerage cited earlier said Citigroup will not be able to liquidate its entire India portfolio as some of the stocks owned by it in the country are on behalf of clients in the form of participatory notes, or PNs. Such holdings can be transferred and not sold.
“They (Citigroup) might not have proprietary holding in all these companies,” said Deepak Jasani, head of retail research at HDFC Securities Ltd. “The situation is different where their funds hold a stake in these companies. There is no direct impact of Citi’s troubles on these funds.” Jasani added that there was no immediate negative trigger because share prices in companies such as Spentex Industries Ltd and Polaris Software Lab Ltd, in which Citigroup has nearly 23% and 27% stakes, respectively, had already fallen sharply in the past couple of months.
Other prominent companies where the India’s largest foreign bank has a sizeable stake include KS Oils Ltd (12.42% stake worth Rs1,616 crore), Shriram Transport Finance Co. Ltd (3.84% holding worth Rs152.4 crore) and Punj Lloyd Ltd (2.56% worth Rs116.3 crore). Citibank also holds 3.68% of equity worth Rs52.6 crore in HT Media Ltd, the publisher of the Hindustan Times and Mint.