In what could be the largest merger in the financial sector, mortgage firm HDFC Ltd will merge with HDFC Bank, creating an entity with a combined market capitalisation of Rs 13.50 lakh crore.
After the merger, HDFC Bank will be 100 per cent owned by public shareholders and existing shareholders of HDFC Ltd will own 41 per cent of HDFC Bank.
Shareholders of HDFC Ltd as on record date will receive 42 shares of HDFC Bank (face value of Rs one each) for 25 shares of HDFC Ltd of Rs two each. HDFC Ltd’s shareholding in HDFC Bank will be extinguished as per the scheme of amalgamation.
HDFC Bank shares shot up by 6.43 per cent to Rs 1,603.15 on the BSE on Monday. HDFC Ltd shares rose by 7.11 per cent to 2,625.10 in the opening session.
HDFC Ltd is India’s largest housing finance company with total assets under management of Rs 5.26 lakh crore and a market cap of Rs 4.44 lakh crore. HDFC Bank is India’s largest private sector bank by assets with a market cap of Rs 8.35 lakh crore. Subsidiaries and associates of HDFC Ltd will become subsidiaries and associates of HDFC Bank.
Speaking about the merger, 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.”
“Over the last few years, various regulations for banks and NBFCs have been harmonised, thereby enabling the potential merger. Further, the resulting larger balance sheet would allow underwriting of large ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector, including credit to the agriculture sector,” Parekh said.
Sashidhar Jagdishan, CEO & MD, HDFC Bank, said “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.”
HDFC Limited has total assets of Rs 6,23,420.03 crore, turnover Rs 35,681.74 and net worth of Rs 1,15,400.48 crore as on December 31, 2021.
HDFC Bank has total assets of Rs 19,38,285.95 crore as on December 31, 2021, turnover (includes other income) of Rs 116,177.23 crore for the nine months ended December 31, 2021, and net worth of Rs 223,394.00 crore as on December 31 , 2021.