HDFC – HDFC Bank Merger – Impications

1. HDFC at its board meeting held on April 04, 2022, approved a composite scheme of amalgamation.

2. The merger between the two entities will be a 2-step process. In the first step: HDFC Investments Ltd. and HDFC Holdings Ltd., wholly-owned subsidiaries of HDFC Ltd., will be merged with and into HDFC Ltd and In Step 2: HDFC Ltd. will be merged with and into HDFC Bank.

3. As per the filing with stock exchanges, the share exchange ratio for the amalgamation is for 25shares of HDFC Ltd; the shareholders will get 42 shares of HDFC Bank. Shareholders having lesser HDFC Ltd shares, the amount will be credited back to them. HDFC will hold 41 percent of the stakes of HDFC Bank.

4. According to the transaction structure, India’s largest housing finance company HDFC Ltd with Assets under Management (AUM) of Rs. 5.26 trillion and a market cap worth Rs. 4.44 trillion will merge with HDFC Bank, which is India’s largest private sector bank as per assets with a market cap of Rs. 8.35 trillion. The market value of the merged entity will be Rs 12.8 lakh crore based on the market capitalization of the two entities as of 1 April 2022. 

5. HDFC Bank and HDFC merger will create a financial sector behemoth with more than Rs 25 lakh crore in assets. 

6. As per filling, Completion of Merger Process is Expected by Q2 / Q3 of FY24 

7. The combined business would benefit from increased scale, comprehensive product offering,  and balance sheet resiliency. 

8. HDFC is a leader in housing finance, while HDFC Bank has a much larger scale and distribution. The merger will enable the group to leverage these synergies. 

9. As per the proposed Scheme, on the Effective Date, all outstanding liabilities, contingent liabilities, debts, and loans (outstanding liabilities) of the Corporation shall be transferred to HDFC Bank on the same terms and conditions as were applicable to the Corporation. Accordingly, HDFC Bank shall meet, discharge, and satisfy its duties and obligations pertaining to the transfer and vesting of all outstanding liabilities of the Corporation on the Effective Date and it shall not be necessary to obtain any further consent.

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