HDFC Bank, one of the leading private sector lenders in India, has recently received approval from the Reserve Bank of India (RBI) to sell a 90% stake in its education loan subsidiary arm, HDFC Credila, to a consortium of private equity firms. The deal is expected to boost HDFC Bank’s income in the fourth quarter of the current fiscal year.
Background of the deal
The decision to divest comes eight months after HDFC Ltd, the parent housing finance company, merged with HDFC Bank. In April 2023, the central bank directed HDFC to reduce its stake in Credila to under 10% over the next two years. HDFC had executed a definitive agreement to sell 90% of its stake in HDFC Credila subject to regulatory approvals in June 2023.
Details of the deal
The private equity consortium that has invested in HDFC Credila includes Kopvoorn B.V., Moss Investments Ltd, Defati Investments Holding B.V., and Infinity Partners. Kopvoorn BV is a part of the BPEA EQT group, while Moss Investments, Defati Investments Holding B.V., and Infinity Partners are a part of the ChrysCapital group. The deal is valued at Rs 9,060 crore, according to a stock exchange notice by HDFC Ltd.
Impact of the deal
HDFC Bank will hold a 10% stake in HDFC Credila after the deal. The bank will also book a profit of about Rs 9,000 crore on selling its stake in HDFC Credila, which will reflect in its other income for the fourth quarter. The deal has also received approval from the Competition Commission of India (CCI) in June 2023.
HDFC Credila is one of the leading education loan providers in India with assets under management of Rs 22,636 crore as of September 2023 and profit after tax of Rs 233 crore in the same period. The company has an agreement with the new investors to bring in a fresh equity infusion of Rs 2,000 crore as part of the transaction post-stake sale completion to support growth in operations.
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