New Delhi:
Housing finance provider HDFC will merge with its subsidiary HDFC Bank on Saturday, as their respective boards approved the proposal on Friday.
As a result of the reverse merger, the 44-year-old institution HDFC Ltd would cease to exist on 1 July. HDFC Ltd, the country’s first home finance company, will lose its identity on Saturday.
“Saturday, July 1, 2023, the ‘Effective Date’ of the aggregated merger schedule, on which date the NCLT’s certified order for approval of the Scheme will be filed by HDFC Investments, HDFC Holdings, HDFC Limited and HDFC Bank with the RoC,” said HDFC Bank in a regulatory application.
The Board of Directors of HDFC Bank, in consultation with the Board of Directors of HDFC Limited, set July 13, 2023 to determine to which shareholders of HDFC Ltd the shares of HDFC Bank would be issued and allocated, it added.
In addition, July 13 has been set for the continuation of warrants of HDFC Limited in the name of HDFC Bank.
The board has set July 12, 2023 for the transfer of non-convertible bonds and July 7 for the transfer of commercial paper from HDFC Ltd in the name of HDFC Bank.
Referred to as the largest transaction in the history of India Inc, HDFC Bank agreed on April 4, 2022 to acquire its parent company, the largest pure-play mortgage lender, in a $40 billion all-stock deal, creating a financial services titan with a combined asset of more than Rs 18 lakh crore.
The total revenue of the merged entity was Rs 41 lakh crore at the end of March 2023. With the merger, the net worth of the entity would exceed Rs 4.14 lakh crore.
The combined profit of both entities was about Rs 60,000 crore at the end of March 2023.
The combined stocks of the HDFC twins will have the highest weighting in the indices at nearly 14 percent, much higher than the index’s current heavyweight, Reliance Industries, at 10.4 percent.
The merger of HDFC Bank and HDFC creates a lender that ranks fourth by market capitalization, behind JP Morgan Chase & Co, Industrial and Commercial Bank of China Ltd (ICBC) and Bank of America Corp, according to data compiled by Bloomberg. It is estimated at about $172 billion.
With the deal going into effect, HDFC Bank will be 100 percent owned by public shareholders and HDFC’s existing shareholders will own 41 percent of the bank. Each shareholder of HDFC will receive 42 shares of HDFC Bank for every 25 shares owned.
The merged entity brings together significant complementarities between both entities and is poised to create meaningful value for various stakeholders, including respective customers, employees and shareholders of both entities through increased scale, expanded product offerings, balance sheet resilience and the ability to leverage revenue opportunity synergies, operational efficiencies and underwriting efficiency, a statement said.
Speaking on the completion of the merger, HDFC Bank CEO and Managing Director Sashi Jagdishan said the combined strength will enable the creation of a holistic financial services ecosystem.
“We are delighted to welcome the talented team of HDFC Ltd to the HDFC Bank family. I believe our journey will be defined by agility, adaptability and a relentless pursuit of excellence. As we navigate the road ahead, we will take challenges as opportunities, learn from our experiences and strive to be the benchmark for success and integrity in the financial services industry,” he said.
It also marks the transformation of HDFC Bank into a financial services conglomerate offering a full range of financial services from banking to insurance and mutual funds through its subsidiaries, the bank said.
Until now, the bank was a distributor of these products.
The merger of India’s largest home finance company HDFC Ltd with India’s largest private bank combines the strengths of a trusted home loan brand with an institution with lower borrowing costs.
The increased net worth would allow for greater credit flow to the economy, it said, adding that it will also enable the taking out of larger card loans, including infrastructure loans, and further contribute to nation-building and job creation.
All employees of HDFC Ltd will become employees of HDFC Bank from the Effective Date.
Over the past few months, the bank has been preparing for a smooth integration of not only systems and processes, but also all aspects that will make HDFC Bank a welcoming place to work for HDFC Ltd’s employees.
Following the merger, HDFC Bank’s principal subsidiaries are 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.
(Except for the headline, this story has not been edited by DailyExpertNews staff and is being published from a syndicated feed.)