MUFG In Talks To Invest $1.5-2 Billion In HDB Financial
MUFG will likely pick 20% stake in HDB Financial, valuing it at $7-10 billion.
Japan's MUFG Bank Ltd. is in discussions with India's largest private lender, HDFC Bank Ltd., to invest $1.5-2 billion in HDB Financial Services Ltd. The discussions have not reached any finality, according to three people with knowledge about the matter.
The investment will likely happen at a valuation of $7–10 billion, ensuring approximately a 20% stake in HDB Financial for MUFG Bank.
As of December 2023, HDFC Bank owned a 94.7% stake in HDB Financial, according to disclosures by the bank.
HDFC Bank is discussing deal terms with more than one potential investor, and a final call will be taken soon, the first person of the three people quoted above told NDTV Profit on the condition of anonymity.
The discussions come ahead of a planned initial public offering by HDB Financial. HDFC Bank had sought to list its subsidiary a few years ago; however, the onset of the Covid-19 pandemic delayed it. The non-bank finance company had faced elevated loan losses during the pandemic.
In the quarter ended December 2020, HDB Financial reported a pro forma gross non-performing asset ratio of 5.9%. However, the reported number was lower at 2.7% as the Supreme Court had ordered lenders to temporarily stay any NPA classification of accounts until further notice.
The interim order was passed as the top court was dealing with multiple writ petitions by borrowers citing the Covid-19 pandemic as a reason for not being able to repay their dues.
As of Dec. 31, HDB Financial's outstanding advances were Rs 84,000 crore, up 29% year-on-year. Its gross NPA ratio was 2.25%, while its capital adequacy ratio was 18%.
