Shares of HDFC Bank Ltd and Housing Development Finance Corporation Ltd (HDFC) were trading in the red on Monday on the back of the overall market being under pressure, according to analysts.
The Sensex and Nifty were trading at the day's low, losing over 1%.
“A broad-based fall has been seen in banking stocks and all heavyweight sectors, signaling high possibility of a global banking crisis post Silicon Valley Bank and Credit Suisse, hitting the sentiment of Indian investors,” said Prashanth Tapse, research analyst, senior VP - research, Mehta Equities Ltd.
On Friday, the National Company Law Tribunal (NCLT) approved the merger of the two entities – HDFC and HDFC Bank – announced last April.
The Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority have both already approved this transaction. The BSE and NSE also approved the transaction in December.
The Reserve Bank of India (RBI) is the only remaining approval body, but it has already granted the mega merger its in-principle approval.
Given that the RBI approvals are an extended procedure, HDFC expects that the merger process will go into action in the third quarter of the upcoming fiscal year.
The tribunal's Mumbai panel gave its approval to the merger of HDFC's real estate division with itself last month. Its mutual fund and insurance divisions have already been merged with the bank.
According to the 23-page ruling issued by the tribunal led by Kuldip Kumar Kareer and Shyam Babu Gautam, the amalgamation would create meaningful value for various stakeholders, including respective shareholders, customers, and employees, as the combined business would benefit from increased scale, comprehensive product offering, balance sheet resiliency and the ability to drive synergies across revenue opportunities, operating efficiencies and underwriting efficiencies, amongst others.
The combined asset base for the merged company will be close to ₹18 lakh crore.
According to Tapse, HDFC and HDFC Bank would remain in action on the back of ongoing merger developments like NCLT approvals.
“We would see sooner or later Mortgage lender HDFC will get merged with HDFC Bank to create India's third-biggest financial entity in terms of market cap. Post-merger it would also become a large consolidated play with a lot of synergies where virtually everything in financial products; from retail banking, corporate banking and housing mortgage financing. We believe this will create a perfect combination stock with well-diversified low-cost funding and a huge customer base of banks with housing loan portfolio leading to comprehensive product offering benefiting customers as well as stakeholders going forward. We continue to remain optimistic on HDFC twins on a long term basis,” he added.