HDFC Bank has announced its intention to divest its 100% stake in HDFC Education and Development Services, utilizing the Swiss challenge method. The private lender has entered into a binding term sheet with an interested party, which will serve as the base bid to seek counter offers from other potential buyers interested in participating in the Swiss challenge process.
In a regulatory filing, HDFC Bank stated that it is currently in the process of finalizing the purchaser for its education services arm. The decision to divest the stake follows a directive from the Reserve Bank of India (RBI) in April 2023, granting the bank a two-year period to hold the erstwhile HDFC Limited’s stake in HDFC Education, post the amalgamation of HDFC entities with HDFC Bank.
“In furtherance of the aforesaid RBI direction and after due deliberation and in the interests of maintaining transparency in the proposed divestment, HDFC Bank has decided to undertake the sale of its 100% stake in HDFC Edu. using the Swiss challenge method,” the bank stated in its exchange filing.
The Swiss challenge method involves soliciting counter offers from interested parties after receiving an initial bid, thereby ensuring a fair and transparent sale process.
Upon completion of the Swiss challenge process, HDFC Bank will finalize the purchaser and subsequently enter into definitive documentation for the proposed transaction. The bank has assured that it will disclose the required details of the definitive documentation in accordance with the applicable regulations.
HDFC Bank’s move to divest its stake in HDFC Education and Development Services aligns with the RBI’s directive and demonstrates the lender’s commitment to adhering to regulatory guidelines. The Swiss challenge method aims to ensure a transparent and competitive process, allowing potential buyers to participate and present their offers for the education services arm.