HDFC Bank-HDFC Merger: HDFC Bank has received the Reserve Bank of India’s (RBI) approval for the merger of Housing Development Finance Corporation with the lender, according to a regulatory filing. The merger remains subject to various other statutory and regulatory approvals.
“HDFC Bank has received a letter dated July 04, 2022 from the Reserve Bank of India (RBI) whereby the RBI has accorded it’s ‘no objection’ for the Scheme, subject to certain conditions as mentioned therein,” HDFC Bank said in a BSE filing in the evening on Monday.
The scheme remains subject to various statutory and regulatory approvals inter alia including approvals from the Competition Commission of India, the National Company Law Tribunal (NCLT), other applicable authorities and the respective shareholders and creditors of the companies involved in the Scheme, as may be required, it added.
Last week, the merger proposal between the two entities received approval from stock exchanges BSE and NSE. Both HDFC and HDFC Bank have got ‘no objection’ from both the bourses. It has cleared the path for the biggest such transaction in Indian corporate history
Punit Patni, equity research analyst at Swastika Investmart, said, “The RBI has given its ‘no objection’ to the merger of HDFC with HDFC Bank. The merger is a win-win opportunity for HDFC Ltd and HDFC Bank. Most HDFC customers (roughly 70 per cent) do not bank with HDFC Bank. Additionally, 5 per cent of HDFCB clients have obtained mortgages from outside sources.”
Patni added that this offers a substantial chance for expansion and a vast cross-selling opportunity as the majority of the customers of HDFC have a long-standing relationship with the company. “Further, the low-cost funds and impeccable liability franchise will help the merged entity to compete with other players in the growing mortgage opportunity.”
In April, HDFC Bank, the country’s largest private sector bank, agreed to take over HDFC in a deal valued at about USD 40 billion. The proposed combined entity will have an asset base of around Rs 18 lakh crore. The merger is expected to be completed by the second or third quarter of FY24, subject to regulatory approvals.
Once the deal is effective, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC will own 41 per cent of the bank. Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares held.
HDFC Chairman Deepak Parekh, while announcing the plan, had called it a “merger of equals” and attributed tight RBI regulations on non-banking finance companies (NBFCs) as a major reason for the merger.
Post the merger, there will be a combined customer base of HDFC Bank and HDFC and they will be offered a number of financial products—savings accounts, mortgages or home loans, life insurance, general insurance, health insurance, credit cards, investment products and personal loans.
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