New Delhi: HDFC, a mortgage lender, announced on Monday that it will merge with HDFC Bank, a private lender. HDFC Ltd shareholders will receive 42 shares of the bank in exchange for their 25 shares under the proposed agreement. The firms expect the merger to close in the second or third quarter of the fiscal year beginning in April 2023, subject to regulatory approvals.
“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 ₹ 2 each of the Corporation,” HDFC stated in a regulatory filing.
Existing HDFC Ltd shareholders will own 41% of the combined firm, which would become a fully public corporation after the housing finance company’s interest in the lender is dissolved as part of the agreement.
“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.
“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 ₹ 17.87 lakh crore and net worth to be ₹ 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 ₹ 6.23 lakh crore, while HDFC Bank has assets worth ₹ 19.38 lakh crore. HDFC Bank has a large customer base of 6.8 crore.
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