HDFC Bank on Monday, April 4, said its board had approved of the merger of HDFC Investments and HDFC Holdings with Housing Development Finance Corporation Limited or HDFC Limited and amalgamation of HDFC Limited into HDFC Bank, creating a banking behemoth. Once the deal is effective, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC will own 41 per cent of the bank, according to stock exchange filings by the firms. The merger is set to make the company the third most valuable in the country.
“The board of directors of HDFC Bank has also accorded approval for the execution of an implementation agreement between HDFC Limited and HDFC Bank, which inter alia sets out the manner of implementing the proposed transaction contemplated under the scheme, the representations and warranties being given by each party and the rights and obligations of the respective parties in relation to the proposed transaction,” the private lender said in a filing with the BSE.
Here are the Key Things You Need to Know About HDFC-HDFC Bank Merger:
1. Every HDFC shareholder will get 42 shares of HDFC Bank for 25 shares held. “This is a merger of equals,” said Deepak Parekh, Chairman, HDFC Ltd. “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.” HDFC Vice-Chairman and CEO Keki Mistry.
2. Leveraging this distribution might, the proposed merger would broaden the home loan offering. With this merger HDFC bank gets an unparalleled advantage through the mortgage portfolio providing it 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.
3. “HDFC –HDFC bank merger will enhance the groups market shares in mortgage business through benefit of lower cost of funds will be made available for mortgage business, diversification of assets in merged entity, this merger makes combined entity strong enough to make offering more competitive products to their existing clients and others and funding challenges will be minimized with merger of two entities,” said Jitendra Upadhyay, senior equity research analyst at Bonanza Portfolio Ltd.
4. “This merger will help expand the customer base and build a product portfolio in the housing loan category. We expect a great future ahead for this giant and this merger might be game-changer in their segment. Recommend to buy this stock and accumulate it on dips,” said Manoj Dalmia, founder and director, Proficient Equities Private Limited
5. “HDFC Bank reported loan growth of 21 per cent year on year and retail deposit growth is healthy. The operating profits may also see a surge on strong commercial banking and corporate segment. The merger of HDFC Bank and HDFC is a complement to the investors and a value addition to HDFC Bank,” said Ravi Singhal, Vice Chairman, GCL Securities Limited.
6. “This was a long awaited gesture from the company and by the share holders. This merger will create a long term wealth for the companies shareholder,” said Sudhanshu Singh, Director IBBM, Moneymakers India Securities.
7. The merger is however subject to approvals from Reserve Bank of India (“\RBI), Securities and Exchange Board of India (SEBI), the Competition Commission of India, the National Housing Bank (NHB), the Insurance Regulatory and Development Authority of India, the Pension Fund Regulatory and Development Authority, the National Company Law Tribunal, SSE Limited and the National Stock Exchange of India Limited and other statutory and regulatory authorities, and the respective creditors and shareholders of the company.
8. Nearly eight years ago, the talks on HDFC-HDFC Bank had gained quite the interest, when the Reserve Bank of India allowed banks to issue long-term bonds to fund infrastructure and affordable housing. At that time, key executives at both entities denied any such proposal.
9. The merger also triggered the markets on the day, as shares of HDFC and HDFC Bank witnessed heavy buying on Monday and settled with nearly 10 per cent gains as investors lapped up the announcement.
10. The Sensex vaulted 1,335 points while the Nifty shot past the 18,000-mark on Monday, fuelled by index heavyweights HDFC twins which soared almost 10 per cent after announcing corporate India’s biggest merger. India’s largest housing finance company HDFC Ltd will merge with the country’s top private lender HDFC Bank to create a banking behemoth with a combined balance sheet of about Rs 17.87 lakh crore.
(With agency inputs)
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