CORPORATE

HDFC, HDFC Bank merger set to create India’s second-largest company by m-cap

HDFC Bank, the country’s most valuable lender, on Monday agreed to take over the country’s largest mortgage lender, HDFC, in a $40 billion deal. The merger will create a financial services titan in the largest transaction in the nation’s corporate history. 


Once the deal was effective, HDFC Bank would be 100 per cent owned by public shareholders, and existing shareholders of HDFC would own 41 per cent of the bank, the two companies said. 


Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares held. 


The proposed entity will have a combined asset base of around Rs 18 lakh crore. The merger is expected to be completed by the second or the third quarter of FY24, subject to regulatory approvals. 


Making the announcement, HDFC Chairman Deepak Parekh said that it was a “merger of equals”, which would also benefit the economy as a larger balance sheet and capital base would allow a greater flow of credit into various sectors.


The transaction involves the amalgamation of HDFC and its two wholly-owned subsidiaries HDFC Holdings and HDFC Investments with HDFC Bank. 


“The merger is a coming together of equals. Our customers will be the biggest beneficiaries,” Mr Parekh told reporters. 


Absorbing HDFC will help HDFC Bank narrow the gap with bigger rival State Bank of India (SBI) and help it expand its home loan portfolio as well as open up the scope for larger loans by building on its 6.8 crore customer base. 


The merger of HDFC Bank and HDFC could create the second-largest company in India by market capitalisation (m-cap), leaving behind TCS, the crown jewel of the Tata group. 


This is the second reverse merger in the banking sector after ICICI did a similar amalgamation with its banking arm ICICI Bank in October 2001.

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