Mortgage Lender HDFC Announces Merger With HDFC Bank

The merger of HDFC and HDFC Bank is expected to be completed by the second or third quarter of FY24; HDFC will acquire 41 per cent stake in HDFC Bank through the transformational merger

New Delhi: Housing Finance company HDFC will merge with India’s largest private lender HDFC Bank.

According to news reports, mortgage lender HDFC will acquire 41 per cent stake in HDFC Bank through the transformational merger, according to a HDFC Bank filing with the stock exchanges.

On Monday, HDFC said its board has approved the merger of its wholly-owned subsidiaries HDFC Investments Limited and HDFC Holdings Limited with HDFC Bank Limited.

The merger of HDFC and HDFC Bank is expected to be completed by the second or third quarter of FY24.

According to the letter to the Sebi by HDFC, the share exchange ratio for the amalgamation of the Corporation with and into HDFC Bank shall be 42 equity shares (credited as fully paid up) of face value of Rs 1 (Rupee One) each of HDFC Bank for every 25 fully paid up equity shares of face value of Rs. 2 (Rupees Two) each of the Corporation.

According to a report by Reuters, existing shareholders of HDFC will own 41 per cent of HDFC Bank. Shares held by the mortgage lender in the bank will be extinguished, making HDFC Bank a full-fledged public company.

HDFC said the proposed transaction shall enable HDFC Bank to build its housing loan portfolio and enhance its existing customer base.

In a regulatory filing, the companies said the subsidiaries and associates of HDFC will shift to HDFC Bank.

Shares of HDFC climbed 8.37 per cent to Rs 2,656, while the HDFC Bank stock went up nearly 8 per cent to Rs 1,623.

According to news report, 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.”

Only upon attaining all approvals by the RBI, SEBI, and such other regulatory approvals, the merger will become effective, said Parekh.