Muristek
New Delhi, April 4
The HDFC twins announced corporate India's biggest merger to create a banking conglomerate with a combined balance sheet of about Rs 17.87 lakh crore.
SENSEX SURGES 1,335.05 POINTS
RECLAIMS 60,000 LEVEL
CLOSES AT 60,611.74
NSE Nifty rose 382.95 points to settle at 18,053.40 points HDFC Bank, HDFC, Kotak Bank, HUL, Lamp;T amp; IndusInd Bank big gainersBiggest merger
Proposed entity to have combined asset base of Rs18L cr Complete merger by second or third quarter of FY24 HDFC shareholders to get 42 shares of HDFC Bank for every 25 shares they ownMerger of equals
The merger is a coming together of equals. Our customers will be the biggest beneficiaries. — Deepak Parekh, HDFC Ltd Chairman
The surprise announcement of the merger of HDFC Ltd, India's largest housing finance company, with HDFC Bank, the country's top private lender, led to the Sensex rising 1,335 points and Nifty by 382 points.
The merger will put HDFC Bank in a position to challenge the top slot in retail housing held by the State Bank of India. Shareholders of HDFC Limited, as on record date, will receive 42 shares of HDFC Bank for 25 shares owned by them. The deal is yet to be approved by the regulatory authorities. SEBI will also take a view on the merged entity becoming the biggest stock on Nifty with a combined weight of 14.34 per cent. Out of prudence, it limits single stock exposure for mutual funds to 10 per cent.
The transaction is expected to be completed by the second or third quarter of FY24. Once the deal is effective, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC Ltd will own 41 per cent of the bank, the companies said in a pre-market filing. HDFC Ltd's 41 per cent stake will enable HDFC Bank to build its housing loan portfolio and enhance its existing customer base. HDFC Bank CEO Sashidhar Jagdishan could lead the merged entity while HDFC Ltd Chairman Deepak Parekh and Chief Executive Keki Mistry will either step down or remain independent directors.
Jagdishan said the value of the proposed deal was $ 40 billion. "The value of HDFC is $60 billion. If you strip off the portion of their (HDFC) holding in us (HDFC Bank), it comes to $40 billion and that's the value of the deal," Jagdishan told reporters.
"Post-merger, HDFC Bank can build its housing loan portfolio and enhance its existing customer base. It has already reported robust loan growth, led by a healthy revival in retail loans. The commercial banking and corporate segment too saw strong traction, which is likely to support growth," said Motilal Oswal Financial Services in a note.
Post-merger HDFC Bank will be twice the size of ICICI Bank, which is the third largest bank now. This is the second reverse merger in the banking sector after ICICI Ltd did a similar amalgamation with its banking arm ICICI Bank in October 2001.