UK-based insurer Standard Life subsidiary, SLAC Mauritius Investment, today sold 4.9 per cent stake in Housing Development Finance Corporation to CLSA Merchant Bankers at Rs 841 per share for a total consideration of Rs 1,007.09 crore (Rs 10.07 billion). Following the sale, Standard Life's holding in HDFC has dropped to 9.35 per cent.
HDFC shares on Wednesday closed at Rs 871.75, up 3.37 per cent, after touching a new 52-week high of Rs 879 in afternoon trade. The sale makes it possible for Standard Life to raise its direct stake in the life insurance joint venture, HDFC Standard Life Insurance Company, to 18.6 per cent from the present 14.9 per cent.
HDFC holds the remaining stake in HDFC Life Insurance Company. Even though an overseas player is allowed to hold up to 26 per cent in an insurance venture in India, Standard Life could not have that much in HDFC Standard Life Insurance Company as the Insurance Regulatory and Development Authority took into account its holding in HDFC.
"This share sale balances our holding and allows us to increase our direct interest in our insurance joint venture, which we believe has a great future," Sandy Crombie, Standard Life's group chief executive, said in a statement today.
If Standard Life wants to hold the maximum allowed foreign holding in HDFC Standard Life, it will have to sell its entire stake in HDFC.
HDFC Standard Life Managing Director & CEO Deepak M Satwalekar said Standard Life was expected to increase its stake in the life insurance company to the permitted level during the next round of capital infusion.
HDFC and Standard Life infused Rs 50 crore of capital in HDFC Standard Life in January-March 2005 in the proportion of their shareholding to take the total capital to Rs 350 crore (Rs 3.5 billion).
According to Crombie, "We have a long-standing, close and valuable relationship with HDFC which we hope will continue for many years to come. Standard Life expects to remain a major shareholder in one of India's best-known and most successful businesses (HDFC)."
