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HDFC, HDFC Bank set to merge

Under this scheme, HDFC Investments and HDFC Holdings, wholly-owned subsidiaries of HDFC will merge into HDFC and HDFC into HDFC Bank.

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Mumba: Mortgage lender Housing Development and Finance Corporation (HDFC) on Monday said its Board has approved the amalgamation of HDFC Investments, HDFC Holdings and HDFC into HDFC Bank, a move that will enable the largest private sector lender to build its housing loan portfolio and enhance its existing customer base.

Under this scheme, HDFC Investments and HDFC Holdings, wholly-owned subsidiaries of HDFC will merge into HDFC and HDFC into HDFC Bank.

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“The Board of Directors of Housing Development Finance Corporation at its meeting held today has inter alia approved a composite scheme of amalgamation of HDFC Investments and HDFC Holdings, wholly-owned subsidiaries of the Corporation, with and into the Corporation and the Corporation with and into HDFC Bank,” it said in a regulatory filing.

HDFC Bank will be 100 per cent owned by public shareholders and existing shareholders of HDFC will own 41 per cent of HDFC Bank. The proposed merger is expected to be completed by the second or third quarter of FY24.

As on date, HDFC, along with two of its wholly-owned subsidiaries, holds 21 per cent of paid-up equity share capital of HDFC Bank. Shareholders of HDFC, as on the record date, will receive 42 shares of HDFC Bank, each of face value of Re 1, for 25 shares held in HDFC (each of face value of Rs 2), and the equity shares held by HDFC in HDFC Bank will be extinguished as per the scheme. The proposed merger is expected to be completed by the second or third quarter of FY24.

According to HDFC, the proposed transaction is to create a large balance sheet and net-worth that would allow greater flow of credit into the economy. It will also enable underwriting of larger ticket loans, including infrastructure loans — an urgent need of the country.

“The Boards of HDFC and HDFC Bank believe that the merger will create long term value for all stakeholders, including customers, employees and shareholders of both entities. The amalgamation of the two entities will provide further impetus to the government’s vision of ‘housing for all’,” the release said.

Commenting on the development Deepak Parekh, Chairman HDFC, 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.”

He further said 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.

Post the combination, HDFC Bank’s customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights through-out the customer life-cycle.

Speaking about the merger, Atanu Chakraborty, Chairman HDFC Bank, said, “The product and market leadership of HDFC in the housing finance business and the distribution and customer leadership of HDFC Bank enables the combined entity to offer a full suite of financial products to Indians at large and the proposed transaction is a big step in realizing the vision of housing for all as envisioned by our government.”

The combined entity will bring together complementary strengths of the two organizations, enabling a rewarding customer relationship, the lender said. “With the leadership that we have built in housing finance and the deep understanding of the housing market across various economic cycles, this transaction helps in realizing the potential of what HDFC’s housing finance business can achieve by leveraging the distribution and customer base of HDFC Bank. It is a step in the right direction, taken at the right time, for value creation for all the stakeholders,” Keki M Mistry, Vice-Chairman and CEO of HDFC said.

The Bank, with more than 68 million customers, has presence in more than 3,000 cities/towns through its 6,342 branches, with about 50 per cent of these branches in semi-urban/rural geographies in the country. Leveraging this distribution, the proposed transaction would broadbase the home loan offering, synonymous with the national objective of Pradhan Mantri Awas Yojana that intends to provide housing for all, it said.

Speaking about the merger, 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 organisations, including shareholders, employees and customers.” 

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