KKR, GIC to sell upto $500m HDFC stakes

Mumbai: KKR & Co and Government of Singapore Investment Corp (GIC) are monetising part of their holdings in India’s largest mortgage lender, Housing Development Finance Corporation, through secondary market transactions, multiple sources with direct knowledge of the matter told ET.

The transaction would be for at least $500 million (Rs 3,472 crore) of HDFC shares, which would constitute a little over 1 per cent of the company’s stake at Friday’s closing stock price. The monetisation will be through multiple block deals, which has already started and should get concluded before expected volatility in markets during general elections.

Through the deals, the New York head quartered private equity giant and the Southeast Asian country’s national investment vehicle are seeking to book a partial profit on their investment.


“KKR has sold some part of their holdings to prop fund books of Citigroup as well as two pension money managers. GIC is also expected to follow KKR and between the two, at least about $500 million worth of HDFC shares are on block in the next couple of weeks,” said one of the people.

KKR declined to comment, while a mail sent to GIC remained unanswered till the publication of this report.

KKR and GIC, along with some domestic and global entities, invested $1.75 billion in HDFC in January last year, in what was termed as the biggest private equity investment in India in 2018. KKR and GIC bought shares at Rs 1,726.05 each. The funds are likely to get a return of 14 per cent as per HDFC’s closing price of Rs 1,967.30 on the BSE Friday.

The transaction will still provide a better net internal rate of return (IRR) — a measure of fund profitability — compared with the median net IRR of 12.6 per cent for all India-focused funds of all vintages, according to data compiled by Londonbased industry tracker Preqin. The median IRR of all Asia-based private equity funds is 11.9 per cent, the data showed.

“For KKR, it was mostly a balance sheet financing and they would be booking profits over time. HDFC is such a nice investment deal from which all PE funds could benefit,” said a second person.

HDFC raised capital last year from investors such as OMERS Administration Corporation that administrates the pension plan for Ontario’s municipal employees, France’s Carmignac Group and Premji Invest, the family office of Wipro founder Azim Premji, besides KKR and GIC.

HDFC’s fundraising was mainly for investing in a preferential share issue by HDFC Bank, which will help the mortgage lender maintain its about 21 per cent stake in the bank.

For KKR, the deal will be yet another monetisation of its India investments. The firm has sold shares in Magma Fincorp and Coffee Day Enterprises last year. The fund has invested more than $9 billion in India since 2009, through private equity, structured credit as well as real estate investments.

GIC is also an aggressive investor in India with investments of over $5 billion across various platforms, including real estate, private and public equity as well as credit funds.

More than a week ago, HDFC raised Rs 1,000 crore by selling rupee-denominated masala bonds, reviving the bespoke funding route introduced three years ago. The bonds offered 8.22 per cent annually with a three-year maturity.

In the October-December quarter, the home loan financier reported a net profit of Rs 2,114 crore, a 60 per cent from the year-earlier period when it had reported one-off gains.