On Monday, India’s leading private bank, HDFC Bank and its housing finance firm, HDFC Ltd, announced their merger. The merger will include all the subsidiaries of HDFC (Investments Ltd and HDFC Holdings Ltd) and associates of HDFC Ltd in the system.
Keki Mistry, vice chairman and chief executive officer of HDFC, said, ” The merger—subject to regulatory approval-is coming together of equals. The customer will be the biggest gainer.”
Details of the HDFC merger:
As per the regulatory filing, 42 fully paid equity shares will be credited of the face value of Rs 1 each of HDFC Bank for every 25 fully paid-up equity shares of the face value of Rs 2 of HDFC.
The merger will likely be completed by the second or third quarter of 2024. HDFC Bank will be 100 per cent owned by public shareholders, while the existing shareholders of HDFC Ltd will own a 41 per cent stake in HDFC Bank after the merger task is accomplished.
“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 filing read.
Benefits from the merger:
Speaking about the merger, 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.”
He also mentioned that the merger would accelerate the pace of credit growth, and the combined balance sheet of the merged entity would be Rs 17.87 lakh crore while its net worth would grow to Rs 3.3 lakh crore.
While as of now, HDFC Ltd’s total assets are worth Rs 6.23 lakh crore and HDFC Bank’s current assets are worth Rs 19.38 lakh.
It is to be noted that HDFC Twins shares have been bullish since the launch of the new Financial Year on April 1. HDFC Twins fueled Sensex by over 1,500 points, as its shares jumped to 7.92 per cent following the news of the merger.
