The correct option is D Outgrowth forms due to repeated cell division.
Hydra reproduce asexually by the process of budding. They use regenerative cells for this process. The bud develops as an outgrowth due to repeated cell division and later develops into tiny individuals. When fully matured, they get detached from the parent body and become new independent individuals.The offsprings are identical to the parents since this is a mode of asexual reproduction.