In the biggest merger in corporate history, India's largest housing finance company Housing Development Finance Corporation (HDFC) will merge into HDFC Bank which is India's leading private lender, according to a regulatory filing on Monday.
HDFC on Monday said that its board has approved the merger of its wholly owned subsidiaries HDFC Investments Limited and HDFC Holdings Limited with HDFC Bank Limited.
The HDFC-HDFC Bank merger is expected to be completed by the second or third quarter of FY24. After the merger, HDFC Bank will be 100 per cent owned by public shareholders and existing shareholders of HDFC Limited will own 41 per cent of HDFC Bank.
Under the proposed deal, the share exchange ratio will be 42 equity shares each of HDFC Bank for every 25 equity shares held in HDFC Ltd.
"... after considering the recommendation and report of the Audit Committee and the Committee of Independent Directors, the Board of Directors of HDFC Bank, at its meeting held on April 4, 2022 approved a composite scheme of amalgamation HDFC Investments and HDFC Holdings, into and with Housing Development Finance Corporation Limited (HDFC Ltd); and HDFC Ltd into HDFC Bank, and their respective shareholders and creditors," the filing said.
HDFC said the Proposed Transaction shall enable HDFC Bank to build its housing loan portfolio and enhance its existing customer base.
"Board of Directors of HDFC Ltd & Board of Directors of HDFC Bank, at their respective meetings today, approved an all-stock amalgamation of HFDC with HDFC Bank. Amalgamation is subject to the approval of shareholders of HDFC & HDFC Bank respectively," Deepak Parekh, Chairman, HDFC Ltd, said.
"The HDFC-HDFC Bank merger will not impact employees of HDFC Ltd," Parekh added.
"The merge will prove out to be beneficial for both as HDFC Ltd will come out from a holding company discount whereas the HDFC Bank will now get more home loan in its portfolio," Ravi Singhal, Vice Chairman, GCL Securities Limited, said.
Ravi Singh, Vice President and Head of Research, Share India, said that the operating profits will see a surge on the strong commercial banking and corporate segment. "The merger of HDFC Bank and HDFC is a complement to the investors and a value addition to HDFC Bank."
The scheme of amalgamation will be subject to various regulatory approvals, including from the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi), HDFC Bank said in the filing on Monday.
Manoj Dalmia, founder and director of Proficient Equities, said that the merger will help expand the customer base and build a product portfolio in the housing loan category. "We expect a great future ahead for this giant and this merger might be a game-changer in their segment."
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