The Children’s Investment Fund Management and its affiliates have emerged as the single-largest seller of Indian stocks among foreign institutional investors (FIIs).
The hedge fund registered its biggest annual loss in 2008.
The fund is liquidating its investments in India at a steep discount to the prices at which it bought the stocks last year. The Bombay Stock Exchange Sensitive Index has declined 15.4 per cent this year while the Bankex, the banking index, has lost 33.4 per cent.
The UK-based hedge fund accounts for about 10 per cent of an estimated Rs 10,772 crore of stock sales by FIIs so far this year. So far, Children’s Fund has sold as much as Rs 1,154 crore worth of stocks, or 33 per cent of its purchases last year, a study by the Business Standard Research Bureau showed.
The hedge fund invested more than Rs 3,462 crore in 2008 in Indian stocks, mainly in banks, at a time when other FIIs were turning bearish.
“Hedge funds, including the Children's Fund, have turned sellers because of their own problems at home,’’ Manish Sonthalia, senior vice president, research & strategy at Motilal Oswal, said. ''The fund now seems to prefer to stay in cash,” he added.
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Children’s Investment Fund, known as TCI, sold a 5 per cent stake valued at Rs 129 crore in Indian Overseas Bank (IOB) on March 9, data released by stock exchanges showed. The fund and its Cyprus-registered affiliate have invested almost entirely in Indian banking stocks through the past year.
However, the stake sale in IOB was at a steep loss to the acquisition price. The hedge fund paid about Rs 650 crore last year to buy an 8.4 per cent stake in the lender, but exited at a much lower price. An e-mail questionnaire sent to Christopher Cooper-Hohn, founder of the fund, did not elicit a response.
| HEDGE FUND STEPS UP INDIA SALES | ||||
| Bank | % stake on Dec ‘08 | Selling in ‘09 % stake | Balance stake (in %) | Value left* at (Rs cr) |
| State Bank of India | 1.40 | 0.00 | 1.40 | 796.00 |
| Punjab National Bank | 9.85 | 3.41 | 6.44 | 616.66 |
| Union Bank of India | 7.78 | 3.65 | 4.12 | 242.75 |
| Indian Overseas Bank | 9.14 | 6.48 | 2.66 | 55.41 |
| Vijaya Bank | 8.80 | 0.15 | 8.65 | 77.20 |
| Oriental Bank | 6.40 | 4.30 | 2.10 | 51.55 |
| Bank of Baroda | 4.02 | 3.35 | 0.67 | 44.45 |
| Bank of Maharashtra | 1.93 | 0.00 | 1.93 | 15.80 |
| *Current market price | ||||
''FIIs and hedge funds have been selling bank stocks on speculation of rise in bad loans, drop in treasury income and narrowing margin,’’ Brics Securities Equities Director Anand Tandon said.
Similarly, the fund sold a part of its stake in Punjab National Bank (PNB) at an average price of Rs 294 a share on March 5 this year. It had bought 14.8 million shares of the New Delhi-based lender at an average price of Rs 516 a share in 2008.
The move obviously comes after the fund, which donates a part of its profits to children’s charities, registered a 43 per cent decline in its performance in 2008. Among other investments TCI has exited are Union Bank of India, Oriental Bank of Commerce and Bank of Baroda.
(Research data inputs by Deepak Koregaonkar)