India’s largest private lender HDFC bank There will be a merger with housing finance firm HDFC Ltd, the companies said on Monday. HDFC Ltd’s subsidiaries and associates will be transferred to HDFC Bank, the companies said in a regulatory filing. “The merger—subject to regulatory approval—is coming up with par. The customer will be the biggest beneficiary,” said Keki Mistry, Vice President and CEO HDFCIn an investor call.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said: “The merger of HDFC with HDFC Bank is an unprecedented mega-merger that will benefit all stakeholders. Shareholders of both the entities will benefit immensely, as their stock prices rise sharply. The boom is already reflected. The merged entity will benefit from the synergies of the merger. The mortgage business will benefit from the bank’s lower cost of funds and the bank will benefit from HDFC’s ability to extend mortgage lending. The merged entity The Indian economy will benefit from huge investments by the U.S. in major infrastructure projects. India will have a big global bank.”
share holding arrangement
Share exchange ratio for amalgamation with HDFC and in HDFC Bank 42 equity shares of face value of Re 1 each of HDFC Bank for every 25 fully paid-up equity shares of face value as fully paid-up will be deposited. HDFC’s Rs 2, the bank said.
stock exchange ratio
Upon the Scheme becoming effective, HDFC Bank will issue equity shares (in the share exchange ratio mentioned above) to the shareholders of HDFC Ltd as on the record date. The equity shares held by HDFC Ltd in HDFC Bank shall stand liquidated as per the plan.
shareholding pattern
When the scheme becomes effective, HDFC Bank will be 100 per cent owned by public shareholders and existing shareholders of HDFC Ltd will hold 41 per cent of HDFC Bank.
The HDFC-HDFC Bank merger is expected to be completed by the second or third quarter of FY24. HDFC said the proposed transaction will enable HDFC Bank to build its home loan portfolio and enhance its existing customer base.
Mortgage as main product
Post the combination, HDFC Bank customers will be offered mortgage in a seamless manner as a flagship product. HDFC Bank will also leverage the long-term mortgage relationship to offer various credit and deposit products enabled through better insights into the customer life-cycle.
share to move forward
HDFC Bank’s share price jumped 13 per cent on the announcement of the transformative merger with HDFC Ltd. “This merger is the biggest surprise move for the markets and a win-win call for all stakeholders. This merger will create the largest financial services conglomerate to compete globally,” said Prashant Taapsee, Vice President (Research) Mehta Equities.
What was the profit for HDFC Ltd?
Santosh Meena, Head of Research, Swastika Investmart Ltd. said: “The biggest advantage for HDFC Ltd. will be access to well-diversified low-cost funding and HDFC Bank Ltd.’s vast customer base. Earlier NBFCs used to enjoy regulatory arbitrage. Vis- a-vis, but regulatory authorities have reconciled this, thus making this merger necessary and creating a competitive advantage over its peers.”
The proposed merger will enable HDFC Bank to build its home loan portfolio. The housing loan market is on the cusp of a strong up-cycle along with tailwinds for the real estate sector, and it offers a stable safe asset class with very attractive risk-adjusted returns. This will increase the size of the merged entity’s balance sheet so that it can underwrite sizable debt.
Meena said that overall it is a marriage made in heaven, with increased scale, wide product offering, balance sheet flexibility and ability to synergize revenue opportunities, operational efficiencies and underwriting efficiencies, thereby empowering the stakeholders of both the companies. There is benefit.
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