HDFC-HDFC Bank Mega Merger To Be Effective From Today, Key Details In 10 Points

Following the merger, the newly formed entity HDFC Bank will emerge as the fourth-largest lender in terms of equity market capitalisation.

HDFC Bank announced on April 4, 2022, the acquisition of its parent company Housing Development Finance Corporation (HDFC) in a $40-billion all-stock deal.

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Termed the biggest transaction in the history of Indian Industry, the board of mortgage lender HDFC and HDFC Bank on Friday approved the merger of the two companies. Following the reverse merger, the 44-year-old institution HDFC Ltd would cease to exist from July 1 onwards. The country's first home finance company HDFC Ltd will lose its identity.

"Saturday, July 1, 2023, to be the 'Effective Date' of the composite scheme of amalgamation, on which date the certified order of the NCLT sanctioning the Scheme will be filed by HDFC Investments, HDFC Holdings, HDFC Limited and HDFC Bank with the RoC," HDFC Bank said in a regulatory filing.

The board of directors of HDFC Bank, in consultation with the board of directors of HDFC Ltd, set July 13, 2023, as the date for determining the shareholders of HDFC Ltd who will receive shares of HDFC Bank. Additionally, July 13 has been designated as the continuation date for HDFC Limited warrants in the name of HDFC Bank. Furthermore, July 12, 2023, has been fixed for the transfer of non-convertible debentures, and July 7 has been assigned for the transfer of commercial papers from HDFC Ltd to HDFC Bank.

In a message to HDFC customers, HDFC Bank MD and CEO Sashidhar Jagdishan said, "This strategic move propels us towards a prominent position among global financial institutions, unifying two influential brands with shared values and a mutual commitment to superior customer service."

"The merger has strengthened our balance sheet substantially, positioning us as a financial powerhouse with enhanced stability and resources, he said. Adding that with HDFC Life, HDFC Asset Management Company, HDFC ERGO and HDFC Capital Advisors joining us as subsidiaries, we are now able to offer you a more comprehensive and diversified range of bundled offerings across payments, savings, insurance, brokerage, loans, and investments."

Here Are The Key Details You Need To Know About The Merger

1. HDFC Bank announced on April 4, 2022, the acquisition of its parent company Housing Development Finance Corporation (HDFC), the largest pure-play mortgage lender, in a $40-billion all-stock deal. This merger creates a financial services powerhouse with a combined asset value exceeding Rs 18 lakh crore.
   
   
2. Following the merger, the newly formed entity HDFC Bank will emerge as the fourth-largest lender in terms of equity market capitalisation. According to data compiled by Bloomberg, the combined value of the merged entity is estimated to be around $172 billion. This positions the merged bank behind JP Morgan Chase & Co., Industrial and Commercial Bank of China Ltd (ICBC), and Bank of America Corp in terms of market capitalization.
   
   
3. According to PTI, as of March 2023, the merged entity's total business volume reached Rs 41 lakh crore, while its net worth surged to over Rs 4.14 lakh crore. Notably, the combined profit of both entities stood at approximately Rs 60,000 crore as of March 2023.
   
   
4. Post-merger, the key HDFC Bank subsidiaries include HDFC Securities Ltd, HDB Financial Services Ltd, HDFC Asset Management Co Ltd, HDFC ERGO General Insurance Co Ltd, HDFC Capital Advisors Ltd and HDFC Life Insurance Co Ltd.
   
   
5. As per MoneyControl analysis, the number of employees in the merged entity will rise by approximately 2.32 per cent, reaching 177,239 compared to the previous count of 173,222. The increase in branches post-merger is projected to be modest, with a rise of 6.7 per cent to a total of 8,344 branches.
   
   
6. HDFC Bank will become wholly owned by public shareholders, and existing HDFC shareholders will hold a 41 per cent stake in the bank. Each HDFC shareholder will receive 42 shares of HDFC Bank for every 25 shares they currently hold.
   
   
7. The merged shares of HDFC Limited and HDFC Bank will hold a significant weighting on the indices, reaching close to 14 per cent. This weighting surpasses the current index heavyweight, Reliance Industries, which has a weightage of 10.4 per cent, as per PTI. 
   
   
8. The merged entity brings together significant complementarities that exist between both entities and is poised to create meaningful value for various stakeholders, including respective customers, employees and shareholders of both entities from increased scale, comprehensive product offering, balance sheet resiliency, and ability to drive synergies across revenue opportunities, operating efficiencies and underwriting efficiencies, a company statement said.
   
   
9. The merger signifies the transformation of HDFC Bank into a diversified financial services conglomerate, offering a comprehensive range of financial products and services. Through its subsidiaries, the bank now provides a wide spectrum of offerings, including banking, insurance, and mutual funds.
   
   
10. As per the news agency, with this merger, HDFC Bank will also be able to offer its clients in-house home loan products. As currently as only 2 per cent of them had a mortgage product from HDFC Ltd.