HDFC to merge with HDFC Bank

Housing finance company HDFC Limited will merge with private sector bank, HDFC Bank. The boards of HDFC and HDFC Bank approved the merger in the respective meetings held today.

The scheme 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 (CCI), the National Housing Bank (NHB), the Insurance Regulatory and Development Authority of India (IRDAI), the Pension Fund Regulatory and Development Authority (PFRDA), the National Company Law Tribunal (NCLT), BSE Limited, the National Stock Exchange of India Limited (NSE) and other statutory and regulatory authorities, and the respective shareholders and creditors, under applicable law, the companies stated.

The companies added that once the scheme is in place, the subsidiaries and associates of HDFC will become subsidiaries and associates of HDFC Bank. 

“Shareholders of HDFC Limited as on the record date will receive 42 shares of HDFC Bank (each of face value of Re.1), for 25 shares held in HDFC Limited (each of face value of Rs.2), and the equity share(s) held by HDFC Limited in HDFC Bank will be extinguished as per the Scheme. As a result of this, upon the Scheme becoming effective, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC Limited will own 41% of HDFC Bank,” the companies stated.

The combined entity will bring together the strengths of both the companies. Post the merger, HDFC Bank’s customers will be able to avail mortgages as a core product in a seamless manner. “HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights through-out the customer life-cycle,” the companies mentioned.

In a statement the companies added that the boards of HDFC and HDFC Bank believe that the merger will create a long-term value for all stakeholders, including customers, employees, and shareholders. The combined entity will also provide an impetus to the government’s vision of ‘Housing for All’.

Deepak Parekh, Chairman HDFC Limited, 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.” The resulting larger balance sheet will allow underwriting of large ticket infrastructure loans, accelerate credit growth, boost affordable housing and increase the quantum of credit to the priority sector, he added.

“The proposed transaction ticks all the right boxes in terms of completion of product offerings, product leadership in home loans as with other retail assets products, distribution strength across the country and a customer base that can be leveraged to cross-sell a complete suite of financial products. It is value accretive for all the stakeholders of both the organisations, including shareholders, employees and customers,” said Sashi Jagdishan, CEO & MD of HDFC Bank.

Shares of HDFC Bank and HDFC zoomed 10 per cent each in early trade after the announcement. 

Also read: HDFC, HDFC Bank shares zoom 10% on merger announcement