BY VIVEK SINHA
Funds backed by governments of Abu
Dhabi and Singapore had earlier cut their holdings in ICICI Bank.
World’s
largest sovereign wealth fund Abu Dhabi Investment Authority (ADIA) has quietly
acquired close to 2 per cent stake in HDFC Bank Ltd, the country’s most valued
private lender, in what could have cost it around Rs 2,000 crore ($400
million), according to VCCircle estimates.
ADIA
did not figure among HDFC Bank’s shareholders owning over 1 per cent stake as
of September 2011, but held 1.94 per cent as on December 31, 2011. Although it
could have acquired around half of its stake before October without having to
make a disclosure, it might have made the bulk of its purchase during the last
quarter when the average share price of HDFC Bank was in the range of Rs 400-Rs
500 a share.
HDFC
Bank scrip was quoting at Rs 484.55 a share, down 1.2 per cent in mid-day
trades on the BSE on Wednesday, but ended the day at Rs 496.7 a share, up 1.18
per cent.
HDFC
Bank reported 31 per cent rise in its net profit for the quarter ended December
31, 2011, beating market forecasts.
ADIA
invests out of the surplus earned from the oil business of the government of
Abu Dhabi, which is part of the UAE. Its assets under management are worth over
$600 billion, making it the world’s largest sovereign wealth fund, according to
data compiled by the Sovereign Wealth Fund Institute.
A
year ago, ADIA also invested in ICICI Bank, the largest private lenders by
assets, but it either diluted its holding below 1 per cent level or exited
completely in mid-2011.
The
sovereign wealth fund recently said it was looking at more investments in India
and in the last quarter, marginally raised its holding in Dr Reddy’s Labs – from
1.72 per cent in September 2011 to 1.77 per cent at the end of December 2011.
During the same period, it cut its stake in LIC Housing Finance from 1.64 per
cent to 1.45 per cent.
Last
year, ADIA also made a small investment in gold loan company Muthoot Finance,
co-investing with Citigroup Global Markets, Goldman Sachs India Fund and Baring
India Private Equity Fund as anchor investors in the company’s IPO.
But
for ADIA, HDFC Bank could be the single largest bet in India and among the
biggest by any alternative asset fund house in India’s financial sector in
recent times. Among others, KKR and IFC invested in Magma Fincorp while Carlyle
invested in India Infoline and Edelweiss.
Singapore Govt Spreads Investments In Indian Financial
Sector
Another
large investor who placed a bet on HDFC Bank is Singapore’s sovereign wealth
fund. The government of Singapore (which operates through two funds GIC and
Temasek) has apparently acquired 1.2 per cent in HDFC Bank last quarter in what
could have cost it around Rs 1,250 crore ($250 million).
This
investment is interesting since Singapore’s sovereign wealth fund already has a
large exposure in ICICI Bank. The government of Singapore held over 9 per cent
stake but had been slowly diluting its stake. As of December 2011, it held a
little over 5 per cent in ICICI Bank.
Both
ADIA and Singapore’s sovereign wealth funds had earlier suffered heavy losses
with the drop in portfolio value after placing multi-billion-dollar bets on
large US financial services firm such as Citigroup and Merrill Lynch. The
investments got singed in the aftermath of the financial crises in the West
that led to sharp downgrading of financial services companies and banks.
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