HDFC Bank and HDFC Ltd on Monday announced the merger of the two entities, setting the stage for one of the biggest deals in the Indian financial sector. The announcement of the merger led to a sharp rise in the share prices of the two entities, which were up by over 7 per cent in the early trading hours.
HDFC Bank said that the transaction is expected to close over the next 18 months, subject to completion of regulatory approvals and other customary closing conditions.
What is the plan for the merger?
As per the transaction structure, HDFC Limited, India’s largest housing finance company with assets under management (AUM) worth Rs 5.26 trillion and a market cap of Rs 4.44 trillion, will merge with HDFC Bank, India’s largest private sector bank by assets, with a market cap of Rs 8.35 trillion.
The subsidiaries or associates of HDFC Limited will also be transferred to HDFC Bank.
What is the share swap ratio of the transaction?
Shareholders of HDFC Limited, as on record date, will receive 42 shares of HDFC Bank for 25 shares of HDFC Limited.
How will the ownership change?
Post the merger, HDFC Limited’s shareholding in HDFC Bank will be extinguished and HDFC Bank will be 100 per cent owned by public shareholders. Existing shareholders of HDFC Limited will own 41% of HDFC Bank.
How will the merger benefit the two entities?
While this will improve their ability to cross-sell products to a larger customer base, the move will also help them leverage their distribution across urban, semi-urban, and rural geographies. The combined balance sheet of Rs 17.87 trillion and Rs 3.3 trillion net worth will enable larger underwriting at scale.