The National Company Law Tribunal (NCLT) is scheduled to hear the application for the merger of Housing Development Finance Corporation (HDFC) with HDFC Bank on February 3. Even if the NCLT gives its approval to the merger, the scheme needs to be vetted by other regulators, and the mammoth exercise is expected to be completed by July, Keki Mistry, vice chairman and CEO, HDFC, tells Shashank Didmishe. Edited excerpts:
The NCLT will hear the merger application on February 3. Will the merger come into effect after the NCLT gives its approval?
Even if the NCLT order is received, we have to get final clearances from all the regulators. We have the RBI, National Housing Board (NHB), Irdai, Sebi and Pension Fund Regulatory and Development Authority. Each of them has a process which has to be followed. So, for example, in our mutual fund business, we have to write to all unitholders and say that the promoter of HDFC Asset Management will be HDFC Bank and not HDFC. Therefore, the unitholder is given the option to withdraw the deposit if he/she wants. To my mind, it will not lead to any money being withdrawn, but it is a process that has to be followed. Based on our calculations, we should be on track to achieve the merger by July.
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So the merger will take effect only after all regulators accord their approvals…
Yes. All the regulators have already given the no-objection or in-principle approval. Only after that we went before the Competition Commission of India. But, the final approval will be given only after completion of the processes. Each regulator will have a different process.
And that will be completed by June-July?
By June-July, we expect all of that to get completed.
What is your overall sense of the Budget?
I think it is an excellent Budget. It is growth oriented. It puts India on the path to become a $5-trillion economy fairly soon. Very importantly, there is no fiscal compromise. The fiscal deficit has been kept completely under control. Last year, the fiscal target was met and for the coming year, fiscal debt has been brought down further. All in all, I would say it is a very strong Budget, which is growth oriented, employment generating and non-inflationary.
Do you think rates on special savings scheme will keep interest rates higher?
You always have certain schemes of the government which help certain segments of the market. For senior citizens, there is a higher interest rate. I do not think those factors have an impact by themselves. Interest rates will be dependent on what happens in the economy. In my opinion, inflation has come down significantly and is pretty much under check.
In the backdrop of the Budget, the RBI is set to announce its policy next week. What do you expect from there?
In my opinion, interest rate increases are now behind us. Having said that, the US has increased interest rates just this week. It is possible that the RBI could look at one last 25-bps hike in rates. But to my mind, there would be no further rate hike.
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What is your outlook on housing sector for the coming year?
I think the outlook on housing continues remains very strong. If you look at the period ended December 2022, our individual loan book saw an 18.3% increase. The economy is strong. The reduction in tax rates will result in more money being available in hands of people, which will result in more demand for housing. So, my outlook on housing is that the growth will remain strong for a long time.