Mortgage lender HDFC on Monday announced that it will merge with private lender HDFC Bank. Under the proposed deal, shareholders of HDFC Ltd will receive 42 shares of the bank for 25 shares held. The companies expect the deal — subject to regulatory approvals — to be completed in the second or third quarter of the financial year starting in April 2023.
Here’s Your 10-Point Cheat-Sheet To This Big Story:
- “The share exchange ratio for the amalgamation of the Corporation (HDFC Ltd) with and into HDFC Bank shall be 42 equity shares (credited as fully paid up) of the face value of Re 1 each of HDFC Bank for every 25 fully paid-up equity shares of the face value of Rs 2 each of the Corporation,” HDFC stated in a regulatory filing.
- Existing shareholders of HDFC Ltd will own 41 per cent of HDFC Bank, the combined entity, which will become a full-fledged public company as the housing finance company’s stake in the lender will be cancelled in the deal.
- “The merger is subject to the receipt of requisite approvals from the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), the Competition Commission of India, the National Housing Bank (NHB), the Insurance and Regulatory and Development Authority, the Pension Fund Regulatory and Development Authority, the National Company Law Tribunal, BSE Limited and the National Stock Exchange of India Limited and other statutory and regulatory authorities, and the respective shareholders and creditors,” HDFC added.
- As of today, HDFC Ltd, along with two of its wholly-owned subsidiaries (HDFC Investments Ltd and HDFC Holdings Ltd), holds 21 per cent of the paid-up equity share capital of HDFC Bank.
- “HDFC Bank has access to funds at lower costs due to its high level of current and savings accounts deposits (CASA). With the amalgamation, HDFC Bank will be able to offer more competitive housing products. The proposed transaction will result in reducing HDFC Bank’s proportion of exposure to unsecured loans,” the mortgage lender further said.
- Deepak Parekh, HDFC Chairman, said, “This is a merger of equals. We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, infrastructure status to the housing sector, government initiatives like affordable housing for all, amongst others.”
- “Housing finance business is poised to grow. The merger will accelerate the pace of credit growth,” Mr Parekh later stated in a media briefing. The combined balance sheet of the merged entity will be Rs 17.87 lakh crore and net worth to be Rs 3.3 lakh crore, he added. Mr Parekh also stated that the HDFC-HDFC Bank merger will not impact the employees of HDFC Ltd.
- Shares of HDFC twins (HDFC and HDFC Bank) zoomed 15.02 per cent and 13.61 per cent, respectively, in early deals.
- Currently, HDFC has total assets of Rs 6.23 lakh crore, while HDFC Bank has assets worth Rs 19.38 lakh crore. HDFC Bank has a large customer base of 6.8 crore.
- Samir Bahl, CEO, Investment Banking at Anand Rathi Advisors, said, “This is India’s largest and most transformational merger in the Indian financial services sector. With this merger, HDFC Bank gets an unparalleled advantage through the mortgage portfolio providing it with a quantum leap in distribution to semi-urban and rural areas with a huge opportunity to cross-sell bank products to a very very sticky client base. The combined entity will be able to extract substantial synergy benefits which abode well for all stakeholders and shareholders.”