ADIA may buy 10% of HDFC Credila from EQT Baring

Housing Development Finance Corp. sold a majority stake in its education loan unit, Credila, to comply with regulatory restrictions imposed by the Reserve Bank of India following its merger with HDFC Bank

Sovereign fund Abu Dhabi Investment Authority (ADIA) is in talks with EQT Baring Private Equity to acquire a 10% stake in education financier HDFC Credila Financial Services.

The stake sale could be part of a broader fundraising effort at Credila or a secondary transaction with EQT Baring, a person aware of the matter said. “Talks are on with EQT about picking up a stake in Credila. The deal may not be a significant premium to the price at which EQT took a stake in the company,” the person said, requesting anonymity.

Housing Development Finance Corp. sold a majority stake in its education loan unit, Credila, to comply with regulatory restrictions imposed by the Reserve Bank of India following its merger with HDFC Bank. EQT and ChrysCapital picked up 72 percent and 18 percent stake, respectively (collectively 90 percent from HDFC Ltd), for Rs 9,553 crore in March.

It was believed that ADIA was keen to be part of the consortium interested in Credila back then. However, the transaction was getting delayed, and talks couldn’t progress when EQT closed in on Credila.

“Now with fresh capital coming into the company, talks with ADIA has restarted,” said another person with knowledge of the transaction.

A spokesperson for EQT declined to comment on the matter, while an email sent to ADIA remained unanswered till publishing the article.

In May, South Korea’s financial services major Shinhan Bank took 10 percent stake for Rs 1,500 in the education financier as part of its fresh capital raising plans through a preferential issue process. The exact capital structure of the shareholders after the fund infusion is not clear, but HDFC Bank continues to hold a stake in the lender.

Credila’s assets under management stood at Rs 27,434 crore as of December 2023 with a gross non-performing assets ratio of 0.08 percent.

Following the sale to private equity firms earlier this year, rating agency ICRA Ltd removed Credila from its rating watch status with negative implications. Despite this, Credila’s ratings on its bank lines (Rs 8,000 crore) and non-convertible debentures were downgraded from AAA to AA (stable) due to the loss of HDFC Ltd’s parentage.