Citigroup tells HDFC Bank, “We ought to see other people.”

India may have waited a little too long to return the affections of foreign investment. Ardent suitors like Citigroup (C, quote) are starting to cash out their shares and walk away.

Citigroup sold its entire 9.85% stake in HDFC Bank (HDB, quote) on February 23, clearing an estimated $1.9 billion for an expected after-tax gain of $722 million. 

In a statement, Citi India CEO Pramit Jhaveri said, “We are pleased with the results of our investment in HDFC and will continue to value our long-standing relationship with the company.” Translated from banker-ese to relationship-speak, that’s “Let’s just be friends.”

The rumor that Citigroup then took its bros to a bar and complained that it just didn’t see a future in the relationship is unconfirmed, because we just made that up. But it seems to be an accurate metaphor for the breakup.

India forbids any single foreign investor to control more than 10% of a bank without the permission of the Reserve Bank of India. Discussions on relaxing this rule have gone nowhere over the last year, and Citigroup seems to have lost patience.

An investor with only a 10% stake has little say in operations, and can easily liquidate the investment. As Reuters commentator Jeff Glekin points out, “had India allowed Citi more skin in the game it might have stuck around.”

Meanwhile, HDB shares dropped 3% on February 24 in the wake of the sale. Rumors that the bank spent the weekend in its bathrobe, watching old movies and eating cocoa mocha chip ice cream, also could not be confirmed.

Leave a Reply