HDFC picks Jefferies as adviser for $1 billion Credila stake sale: Report

India’s largest mortgage financier HDFC has picked Jefferies Financial Group Inc. to manage the sale of a unit that offers student loans, Bloomberg reported on Tuesday, citing people familiar with the matter.

According to the Bloomberg report, HDFC could seek a value of as much as $1 billion for HDFC Credila Financial Services in a sale, which is part of the lender’s moves to comply with regulators’ requirements for its merger with HDFC Bank.  Jefferies has started initial talks with interested bidders, and a formal process for the sale may be launched soon, as per the Bloomberg report.

The RBI had permitted HDFC Bank to continue to hold HDFC’s stake in HDFC Education and Development Services Private, engaged in operating three education schools, for a period of two years. It also allowed it to hold stake in HDFC Credila Financial Services, subject to the shareholding being brought down to 10 per cent within two years from the effective date and not onboarding new customers.

This should not be an issue, the brokerage said in a recent note.

"Investments including subsidiaries and associates of are allowed to continue for the bank. Hence HDFC Bank or HDFC would need to increase stake in HDFC Life and HDFC ERGO to more than 50 per cent, merger date. While this would certainly be a positive for HDFC Life and HDFC AMC, it confirms our stance and overhang of RoE dilution related to merged entity due to likely stake sale of subsidiaries/associates. Assuming HDFC increases stake to 51 per cent in both entities via open market, contribution to SOTP would not change materially," Prabhudas Lilladher said last week.

"This benefit would be partly offset, as holding in HDFC Credila needs to be brought down to 10 per cent within 2 years. HDFC Credila originally contributed Rs 5 per share or 0.2 per cent to SOTP which would now reduce to Rs 0.5 per share," it said.

Also read: Jet Airways shares down 5%, hit fresh 52-week low; here’s why

Also read: M&M Financial shares surge 7%, hit fresh 52-week high; analysts see further upside