HDFC merger likely to create to third largest entity in India

HDFC Bank announced the merger of mortgage lender HDFC with the bank on Monday in an effort to build a financial giant. According to a regulatory statement, HDFC Bank's board of directors has authorised the merger of HDFC Investments and HDFC Holdings with HDFC Limited and HDFC Limited into HDFC Bank. This merger will most likely result in the formation of India's third largest business in terms of market capitalisation.

The market value of HDFC Limited, India's largest home financing firm, is Rs 4.44 lakh crore. As of April 1, HDFC Bank has a market value of Rs 8.35 lakh billion. As a result of these two businesses' market valuations, the amalgamated firm would have a market value of Rs 12.8 lakh crore as of April 1. HDFC has said that it will own 41% of the amalgamated business.

"This is a joint venture of equals. Various laws for banks and NBFCs have been harmonised in recent years, allowing for the prospective merger," said Deepak Parekh, chairman of HDFC.

According to the bank, the share exchange ratio for the amalgamation of HDFC Limited with and into HDFC Bank will be 42 equity shares (credited as fully paid up) of HDFC Bank with a face value of Rs 1 (Rupee One) for every 25 fully paid-up equity shares of HDFC Limited with a face value of Rs 2 (Rupee Two).

According to an HDFC Bank filing with the stock markets, the transformative merger will result in HDFC acquiring a 41 percent interest in HDFC Bank. The HDFC-HDFC Bank merger is scheduled to close in the second or third quarter of FY24. 

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