HDFC picks up stake in Sri Lankan company - Views on News from Equitymaster

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HDFC picks up stake in Sri Lankan company

Oct 6, 1999

Housing Development Finance Corporation (HDFC) is picking up a 15% stake in a Sri Lanka based company, NDB Housing Finance Company. The company's decision will involve an investment outlay of Rs 57 m. The International Finance Corporation (IFC) is also picking up a 15% stake in this newly formed company. HDFC (FY99 Total Income Rs 17.5 bn) is the largest housing finance company in India with a 55% market share. HDFC operates 41 offices and has a field force of more than 42,000 commission agents who mobilize retail deposits.

HDFC, which has also picked up a stake in a Bangladesh based company, seems to be interested in participating in the housing boom in these countries. As the housing finance industry is not well developed in these countries, HDFC is utilising this opportunity enter in the development stages. It plans to impart skills and technology to these companies.

HDFC's initial investment is minimal and, worst come to worst, would not amount to much if the investment were to go bad. However, the opportunity gain of such investments is large. It will get exposure to new markets, at relatively lower costs, and at some point of time it can decide to increase its presence in these countries. This will provide the company a new avenue for generating growth. As both the investments are in the sub continent, it hints at a game plan of dominating the housing sector in the entire region, as against only in India.

Market View:
The stock has always been a favorite of analysts and fund managers as it has an excellent asset quality and a good management. The FIIs have already exhausted their 30% investment limit in the company.

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