Aditya Puri family nets Rs 200 crore selling HDB stake

A family trust of Aditya Puri, HDFC Bank’s Managing Director, has partly sold its stake in HDB Financial Services, the unlisted NBFC arm of the private lender, people aware of the development said. Vistra ITCL sold shares at Rs 800-825/share to a South based family office recently for around Rs 200 crore taking advantage of the high demand for the shares and its rising valuation.

An HDFC Bank spokesperson declined comment on the issue while Shyamala Gopinath, chairperson of the bank and Deepak Parekh, chairman, HDFC did not respond to ET’s email questionnaire sent on December 18.

HDB Fin Services which is considering an IPO is valued at Rs 90,000 crore in the unlisted market, ET reported on December 12. Its stock is trading at Rs 1,100 apiece against Rs 600-700 a year earlier. The Investors have bought HDB Financial shares over the past year on expectations that Puri will steer the company once he leaves the executive corner room role at HDFC Bank, the financier’s parent company, expected in October 2020. Puri was inducted as chairman of HDB’s board effective from May 1, 2016.

But HDFC Group watchers feel Puri’s continuation as the chairman of the NBFC even after his retirement from HDFC Bank might destabilise the parent, and have implications for the bank’s new CEO who is slated to come in as Puri’s successor.

HDB Financial has now emerged as the 4th most valuable NBFC in the country with a strong retail franchise that has expanded in consumer durable financing, digital products loans across metros and even non metros at a time when the entire sector is battling severe bad loans and liquidity concerns.

The allotment of equity shares in HDB Financial Services was made to a few HDFC Bank employees, including Puri in 2007. The quantity and rationale were approved by the board of directors of the bank, said the bank’s spokesperson in an earlier correspondence with ET in July this year. Ruling out any potential conflict of interest in respect of the roles and operations of these employees in the bank, he said, “This was at a time when HDB had just come into being and employees were allotted small quantity of shares in it,” the spokesperson added. “The shares were allotted at par to both the Bank and the said employees. The point of allotting these was to align the interests of senior management of the Bank with the growth of the then newly formed subsidiary. As part of oversight over the Bank’s subsidiary, three officers who are part of the senior management of the Bank are directors on the Board of HDB.”

Puri, as on date has no direct shareholding in HDB, as per the bank’s spokesperson. In 2013, he transferred his shares to his family as part of the succession planning. The family’s shareholding was transferred to the Trust, namely, Vistra ITCL (India) Ltd. in December 2017. The annual report of FY2016-17 of Vistra shows Amrita Puri Puri’s daughter, as the largest individual shareholder with 14.81 lakh shares worth 0.19 per cent stake in the company.

As on 31ST March 2019, Vistra ITCL (India) Limited owned 14.8 lakh shares or 0.189 per cent of HDB as per regulatory filings. In its annual report for 2018-2019, Vistra is number 3 in the list of top 10 shareholders of the shadow lender other than directors, promoters, ADR and GDR holders.

The bank held 95.53 per cent in HDB.

HDB had Rs 55,425 crore of assets under management and posted a profit of Rs 1,724 crore at the end of March 2019. Revenue more than tripled to Rs 8,725 crore. Its overall loan portfolio expanded 22 per cent to Rs 56,287 crore. Return on assets was about 2.3 per cent in FY19, aided by a healthy net interest margin and low credit cost, while return on equity was at17.2 per cent. Investors are optimistic about the NBFC’s growth as it has access to cheap sources of funds through its parent and generates higher margins.

The loan book has also diversified, with increased presence in commercial vehicle/construction equipment (CV/CE) financing and business loans. As a result, the share of loans against property (LAP) declined to 35 per cent as on June 30, 2019, as compared to 60 per cent as on March 31, 2016. Whereas, that of CV/CE loans and business loans rose to 34 per cent and 21 per cent, respectively, from 21 per cent and 15 per cent, respectively.

In its assessment as on August, Crisil had rated loan facilities worth Rs 25,000 crore and NCD programme to the tune of Rs 15,000 crore at AAA. The rating agency in its rationale had credited HDFC Bank’s support and constant fund infusion as one of the prime reasons for the top-notch rating.

“Return on managed assets was 2.3 per cent for the full year ended March 31, 2019. It has been stable for the past three years, aided by healthy net interest margin of over 6.5 per cent and low credit cost of 1.3 per cent for fiscal 2019. Operating expenses, which had increased to 7.7 per cent (as a percentage of average total assets) in fiscal 2017 on account of amalgamation of its business process outsourcing (BPO) operations fell to 6 per cent during fiscal 2019, but continue to be relatively high,” the ratings agency said in August.