HDFC, HDFC Bank shares down on stake sale in HDFC Credila for ₹9,060 cr

Shares of Housing Development Finance Corp Ltd (HDFC) dipped 0.75% today after the mortgage lender announced the sale of 90% of its total stake in its education loan subsidiary HDFC Credila Financial Services Ltd to Baring PE and ChrysCapital for ₹9,060 crore. The deal, run on a very tight timeline of just 54 days, represents the largest-ever private equity buyout in the Indian financial services sector.  

The stock opened at ₹2,654.95 and rose to the intra-day low of ₹2,655.45 on the Bombay Stock Exchange (BSE). At the current share price, the company's m-cap stands at ₹4,86,660.86 crore.

Similarly, the HDFC Bank stock is also down 0.64% at ₹1,594.70 against the previous session close of ₹1,604.15. The HDFC's decision to bring down its stake to 10% in Credila comes after the Reserve Bank's advice as HDFC Bank and HDFC approach their much-talked-about merger.

A statement said HDFC Limited, HDFC Bank Limited, and HDFC Credila entered into definitive agreements to sell a majority stake in HDFC Credila to an investor consortium of BPEA EQT and ChrysCapital. HDFC Credila claims to be one of the largest non‐bank lenders in the Indian education financing market. 

HDFC Credila's revenue during FY2022-23 stood at ₹1,352.18 crore, while its net worth as of March 31, 2023 was ₹2,435.09 crore.

The transaction records the sale of around 13,29,49,207 shares of HDFCA Credila. Additionally, the corporation will have the right to nominate 1 non-executive nominee director on the board of HDFC Credila on terms as agreed under the shareholders' agreement.

The consortium valued HDFC Credila at a pre‐money valuation of ₹10,350 crore and will infuse primary proceeds of ₹2,000 crore into the company. HDFC Limited will continue to remain invested with a stake of 9.99% in HDFC Credila. The transaction, however, is subject to regulatory approvals from the RBI and CCI. 

Jefferies acted as the exclusive financial advisor to HDFC Limited and HDFC Credila on the transaction. 

Established in 2006 and headquartered in Mumbai, HDFC Credila claims to be one of India’s premier non‐bank lenders in the education finance space. It provides education loans to students pursuing higher education in India and overseas. The company says it has extended loans to over 1.24 lakh customers, with the current loan book at over ₹15,000 crore. 

Keki Mistry, CEO, HDFC Limited, said the company has built an impressive position in the education financing market in India and has continued to maintain very high asset quality. "We believe the business is well positioned to continue its strong growth momentum under its new shareholders.” 

Jimmy Mahtani, partner and head of BPEA EQT India said the demand in India for obtaining a higher education is growing at a faster pace than ever, accelerated by our country’s growing middle class and students’ striving for better career opportunities.