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.
Shares of HDFC Bank and HDFC jumped 10 per cent each in early trade after the entities announced the merger. HDFC Bank shares were up 9.99 per cent at ₹1,656.90 on BSE while shares of mortgage lender HDFC gained 10 per cent to trade at ₹2,696.
Area of business
The HDFC Corporation is a deposit-taking housing finance entity(ies); company registered with the NHB and its shares are listed on the Stock Exchanges.
HDFC Bank is a banking company licensed by the RBI under the provisions of the Banking Regulation Act, 1949. Its shares and American Depositary Receipts are listed on the Stock Exchanges and New York Stock Exchange respectively.
HDFC investments limited and HDFC holdings limited are non-deposit, accepting non-banking finance companies, registered with RBI, engaged in the business of investments in stocks, shares, dentures and other securities. Both are unlisted Companies.
What this means for investors
The amalgamation of HDFC into HDFC Bank will create the third-largest entity in India in terms of market capitalisation ( ₹12.79 lakh crore), after Reliance Industries ( ₹17.93 lakh crore) and Tata Consultancy Services ( ₹13.77 lakh crore)
The share exchange ratio for the amalgamation of HDFC with and into HDFC Bank will be 42 equity shares of the face value of ₹1. This means shareholders of HDFC as on record date will receive 42 shares of HDFC Bank ( ₹1 each) for 25 shares of HDFC Limited ( ₹2 each).
Post the amalgamation, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.
The merger will create a large balance sheet of ₹25.61 lakh crore, which is now closer to the country’s largest bank — the State Bank of India with ₹45.34 lakh crore. The HDFC Bank was already the country’s second-largest bank. ICICI Bank has a balance sheet size of ₹17.74 lakh crore as of March 31, 2021.
HDFC Bank, which is India's largest private sector bank, has a large base of over 6.8 crore customers. The bank platform will provide a well-diversified low-cost funding base especially current and savings accounts or CASA. The bank will be able to offer more competitive housing products.