Citigroup sold its stake in India's Housing Development Finance Corp. (HDFC) for $1.9 billion, cashing in a pile of its India chips to shore up its financial woes in other markets.
According to Bloomberg, the sale resulted in a pretax gain of $1.1 billion for Citigroup, and HDFC shares slipped as much as 6.3 percent today after the selloff.
What's interesting to me is that foreign firms continue to see India as a cash machine, as well as a future market opportunity. Notably, a number of other large companies, such as Standard Chartered, have found that their Indian units are outperforming the head office in recent years. I'm guessing Citigroup is foregoing a pretty big upside from HDFC from selling out now, under diress.
As the Wall Street Journal puts it, HDFC is "hardly a selloff candidate."
"It reported a 10% increase in net profit in the December quarter and its loan book is growing at a robust 19%, better than the sector as a whole. Bad loans fell to 0.82% of total advances from 0.85% a year earlier, even as much of the industry has seen an increase in nonperforming assets," writes Harsh Joshi. "More importantly, it is the biggest lender in India's promising housing market, which is forecast to grow at a compounded annual rate of 8% for the next three years, realty research firm Liases Foras says."
Too bad Citigroup has to play by the same rules we all do: It takes money to make money.