Investments in non-core unlisted companies at Rs 363.5 cr as on March 31, 2009.
Shareholders of the country’s largest mortgage financier, Housing Development and Finance Corporation (HDFC), may be in for a windfall. The company plans to move its investments in non-core unlisted companies to a special purpose vehicle and sell stakes to private equity investors at a substantial mark-up.
HDFC’s investments in non-core unlisted companies added up to Rs 363.5 crore as on March 31, 2009, according to the company’s annual report. These are distinct from investments in subsidiaries such as HDFC Standard Life and HDFC Mutual Fund, and associate companies such as HDFC Bank.
When asked where these funds would be deployed, HDFC Chairman Deepak Parekh told Business Standard that the money belonged to shareholders and would have to be returned to them.
“We have not decided where this money will be used. However, everything is at a planning stage and nothing is finalised. It will take us at least six months to firm up our plans,” he added.
On March 16, top managers of HDFC, including Chairman Deepak Parekh, Vice-Chairman & CEO Keki Mistry and Managing Director Renu Karnad interacted with investors in the US at a meet organised by investment group CLSA.
According to the notes of the meeting published by CLSA, HDFC expects to unlock significant value from its investments in unlisted companies. “The management expects that listing of HDFC Standard Life in the next 12 months and transfer of strategic stakes in non-subsidiaries and associate companies to a separate company will help the HDFC group unlock value from investments made over the past 8-10 years,” said the notes.
“HDFC may deploy the money raised through listing of the life insurance business either to fund its foray into the education business and financing of education loans or increase dividend payouts,” said the notes.
When asked if HDFC was planning to foray into education, Parekh said, “Everything is at a planning stage and nothing has been finalised yet.”
“There is lot of unrealised value lying on our balance sheets at historical costs in the form of our stakes in unlisted companies. We haven’t made a concrete plan as to how we will unlock this value,” said Mistry.
Chief among HDFC’s unlisted investments is a 5 per cent stake in cement manufacturer Lafarge India which has a book value of Rs 50 crore. The mortgage financier’s stakes in IL&FS and SKR BPO have book values of Rs 94.7 crore and Rs 40.99 crore, respectively.
HDFC’s stock rose 0.96 per cent on the Bombay Stock Exchange on Friday to end the day at Rs 2,610.8.
