The domestic stock exchanges, BSE and NSE, on Tuesday gave in-principle approval to the merger of Housing Development Finance Corp (HDFC) and HDFC Bank. The proposed merger, which is touted to be the biggest in India’s corporate history, has already been approved by the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), the Pension Fund Regulatory and Development Authority (PFRDA), and Competition Commission of India (CCI). It had also received no objection certificates from both the stock exchanges. The amalgamation of HDFC into HDFC Bank is expected to be completed by the second quarter of FY24.
“We wish to inform you that BSE and NSE vide their letters dated December 13, 2022, granted their in-principle approval for the transfer of non-convertible debentures issued by HDFC Limited to HDFC Bank, in terms of Regulation 59 of the Listing Regulations, subject to sanctioning of the Scheme by the National Company Law Tribunal,” HDFC said in an exchange filing late evening on Tuesday.
Reacting to the news, shares of HDFC Bank opened a tad higher today and gained as much as 0.9% to ₹1,664.60 on the BSE, while the market capitalisation (m-cap) climbed to ₹9.27 lakh crore. Similarly, the share price of HDFC rose 1% to ₹2,728, against the previous closing price of ₹2,700.95. The m-cap of the mortgage lender increased to ₹4.96 lakh crore. In comparison, the BSE benchmark Sensex was trading 230 points, or 0.37%, higher at 62,763 levels at the time of reporting.
The amalgamation of HDFC, India’s largest housing finance company, into HDFC Bank, the country’s largest private sector lender, will create the third-largest entity in India in terms of market capitalisation (₹14.23 lakh crore), after Reliance Industries (₹17.75 lakh crore) and Tata Consultancy Services (₹12.28 lakh crore). The merged entity will also become twice the size of ICICI Bank (₹6.48 lakh crore).
The share exchange ratio for the amalgamation of HDFC with and into HDFC Bank will be 42 equity shares of face value of ₹1. This means, shareholders of HDFC as of 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.
In April this year, HDFC Bank and HDFC announced their merger to create long-term value for all stakeholders, including customers, employees, and shareholders of both entities. The combined entity will bring together complementary strengths of the two organisations, enabling seamless delivery of home loans and leverage on the large base of over 68 million customers of HDFC Bank. The proposed transaction is to create a large balance sheet and net-worth that would allow a greater flow of credit into the economy.