Housing Development Finance Corporation and HDFC Bank boards on Friday announced the merger of the two entities, effective from July 1 (today) following approval from shareholders and regulators. The merger creates a lender that ranks fourth in equity market capitalisation, behind JPMorgan Chase, Industrial and Commercial Bank of China (ICBC) and Bank of America, according to data compiled by Bloomberg.
The merger, which was announced over a year ago on April 4, 2022, has indicated a timeline of 15-18 months. As per the plan, HDFC will acquire a 41% stake in HDFC Bank through the merger.
HDFC Bank on April 4, 2022, had agreed to take over its parent, which is the largest pure-play mortgage lender, in a $40-billion all-stock deal, creating a financial services titan with a combined asset of over Rs 18 trillion.The combined shares of the HDFC twins will have the highest weighting on the indices at close to 14%, much higher than the present index heavyweight Reliance Industries with a 10.4% weightage.
HDFC Bank will issue and allot 42 new equity shares with a face value of Re 1 each, fully paid-up, to eligible shareholders for every 25 equity shares with a face value of `2 each, fully paid-up, held by such shareholders in HDFC as of the record date, which is July 13, 2023.
“While this will be my last communication to shareholders of HDFC, rest assured we now stride tall into a very exciting future of growth and prosperity. The HDFC experience is invaluable. Our history cannot be erased, and our legacy will be taken forward,” said Deepak Parekh, HDFC Chairman, in his final letter to shareholders.
Speaking about the completion of the merger, Sashi Jagdishan, CEO & MD of HDFC Bank, said, “This is a defining event in our journey, and I am confident that our combined strength will enable us to create a holistic ecosystem of financial services. We’re truly happy to welcome the talented team of HDFC into the HDFC Bank family. I believe our journey will be defined by agility, adaptability, and a relentless pursuit of excellence. As we navigate the path ahead, we will embrace challenges as opportunities, learn from our experiences, and strive to be the benchmark of success and integrity in the financial services industry.”
This merger transforms HDFC Bank into a financial services conglomerate that offers a full suite of financial services. The increased net worth will enable the underwriting of larger ticket loans, including infrastructure loans.
According to an exchange notification, all employees of HDFC will become HDFC Bank employees. “Over the past months, the bank has been preparing for the smooth integration not only of systems and processes but also of all aspects that will make HDFC Bank a welcoming place of work for the employees from,” the notification said.
Post-merger, the key HDFC Bank subsidiaries will include HDFC, HDB Financial Services, HDFC Asset Management, HDFC ERGO General Insurance, HDFC Capital Advisor, and HDFC Life Insurance.