The board of Housing Development Finance Corporation (HDFC) Limited has approved the merger of HDFC Limited with the HDFC Bank, the company notified in a regulatory filing on Monday.
The share exchange ratio for the amalgamation of HDFC Limited with and into HDFC Bank shall be 42 equity shares (credited as fully paid up) of the face value of Re 1 each of HDFC Bank for every 25 fully paid-up equity shares of the face value of Rs 2 of HDFC Limited. According to the company, HDFC Limited’s shareholding in HDFC Bank will be extinguished as per the scheme of amalgamation. Upon the scheme becoming effective, HDFC Bank will be 100 per cent owned by public shareholders and the existing shareholders of HDFC Limited will own a 41 per cent stake in HDFC Bank.
Deepak Parekh, the Chairman of 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, the infrastructure status of the housing sector, and 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.”
Sashi Jagdishan, CEO & MD, HDFC Bank said “The proposed transaction ticks all the right boxes in terms of completion of product offerings, product leadership in home loans as with other retail assets products, distribution strength across the country, and a customer base that can be leveraged to cross-sell a complete suite of financial products. It is value accretive for all the stakeholders of both the organizations, including shareholders, employees, and customers.”
Post the announcement, the shares of HDFC Bank was up 9.2 per cent at Rs 1,645, whereas the shares of HDFC was up 11.2 per cent at Rs 2,731.
