A merger announcement was made by the two entities HDFC Bank and HDFC Ltd., setting the stage for one of the biggest deals in the financial sector. A sharp rise in the share prices of the two entities was seen in the merger announcement. Share prices have gone up to 7 percent in the wee trading hours.
HDFC bank disclosed that the transaction is expected to be close in the next 18 months subject to completion of regulatory approvals and customary closing conditions.
HDFC, India’s largest housing finance company with Assets under Management(AUM) worth Rs.5.26 trillion and a market cap of Rs 4.44 trillion will merge with HDFC Bank, India’s Largest private sector bank of assets with a market cap of Rs 8.35 trillion. The subsidiary or associates of HDFC Limited will be transferred to HDFC Bank.
The shareholders of HDFC Limited will receive 42 shares of HDFC Bank for @% shares of HDFC Limited.
HDFC Limited’s shareholding in HDFC bank will be null and HDFC bank will be 100 percent owned by public shareholders post the merger. Existing shareholders of HDFC Limited will be owned by 41% of HDFC Bank.
Benefits of merger;
This will improve the ability to cross-sell products to a larger customer base. This move will help them leverage their distribution across urban, semi-urban, and rural geographies. A combined balance sheet of Rs.17.87 trillion and Rs.3.3 trillion net worth will enable larger funding at scale.