HDFC gets bourses' approval for transfer of NCDs to HDFC Bank; shares rise

The BSE and the National Stock Exchange (NSE) have given their in-principle approval for the transfer of non-convertible debentures (NCDs) from HDFC (Housing Development Finance Corporation) Ltd to HDFC Bank, in a bid to smoothen out the merger between the two entities which will conclude in July this year.

"We wish to inform you that BSE and NSE vide their letters dated April 26, 2023, granted their in-principle approval for the transfer of additional NCDs issued by HDFC Limited post receipt of the earlier approval on December 13, 2022, to HDFC Bank, in terms of Regulation 59 of the Listing Regulations," HDFC said in a regulatory filing on Wednesday. The proposed amalgamation now needs the final approval from the Securities and Exchange Board of India (SEBI), which will pave the way for the largest merger in the country’s corporate history.

Following the development, shares of HDFC on Thursday surged 0.31% to hit an intraday high of ₹2,770 apiece on the Bombay Stock Exchange. The scrip opened higher at ₹2,762 on Thursday, as against the closing price of the previous session at ₹2,761 on Wednesday. Currently, the share price of HDFC is trading 1.5% lower than the 52-week high of ₹2,815, whereas the stock is trading 36.6% higher than the 52-week low of ₹2,026.55. During the session, the company’s market capitalisation stood at ₹5,07,805 crore with 33,354 shares exchanging hands on the BSE as against the two-week average of 0.32 lakh shares.

The development comes days after the Reserve Bank of India (RBI), last week, allowed HDFC Bank or HDFC to increase the shareholding to more than 50% in HDFC Life Insurance Company Limited and HDFC ERGO General Insurance Company Limited prior to the effective date of the merger. The RBI has also allowed both HDFC Bank and HDFC Limited to meet priority sector lending goals in three years post-merger. 

The apex bank has also permitted HDFC Bank to continue holding HDFC Limited’s stake in HDFC Education and Development Services Private Limited, which is engaged in operating three education schools for a period of two years from the effective date of the merger.

In April last year, HDFC Bank, the country’s largest private sector lender, and HDFC, India’s largest housing finance corporation, announced their merger to create long-term value for all stakeholders, including customers, employees, and shareholders of both entities. The proposed transaction is to create a large balance sheet and net worth that would allow a greater flow of credit into the economy. Post the amalgamation, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.