Upon the Scheme becoming effective, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.
Following the announcement, shares of HDFC surged 12.14% to Rs 2,748.45 and shares of HDFC Bank surged 9.06% to Rs 1642.80 on the BSE.
The board of Housing Development Finance Corporation (HDFC) on Monday (4th April) approved a composite scheme of amalgamation of HDFC into HDFC Bank, and their respective shareholders and creditors. The subsidiaries and associates of HDFC will shift to HDFC Bank.
Shareholders of HDFC as on the record date will receive 42 shares of HDFC Bank (each of face value of Re 1), for 25 shares held in HDFC (each of face value of Rs 2), and the equity share(s) held by HDFC in HDFC Bank will be extinguished as per the Scheme.
As a result of this, upon the Scheme becoming effective, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.
"The proposed transaction is to create a large balance sheet and net-worth that would allow greater flow of credit into the economy. It will also enable underwriting of larger ticket loans, including infrastructure loans -- an urgent need of the country," HDFC said in a statement.
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As of 31 December 2021, HDFC Bank's total advances stood at Rs 12,68,863 crore and HDFC's total advances stood at Rs 5,25,806 crore.
Post merger, pro forma total advances of the combined entity is expected to be Rs 17,86,669 crore.
The proposed transaction will result in reducing HDFC Bank's proportion of exposure to unsecured loans. The merger is expected to result in bolstering the capital base and bringing in resiliency in the balance sheet of HDFC Bank.
Post the combination, HDFC Bank's customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights through-out the customer life-cycle. This will result in an enhanced value proposition and customer experience for all customers of the combined entity.
The boards of HDFC and HDFC Bank believe that the merger will create long-term value for all stakeholders, including customers, employees and shareholders of both entities. The amalgamation of the two entities will provide further impetus to the Government's vision of Housing for All.
Deepak Parekh, chairman HDFC, said, "This is a merger of equals. We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, infrastructure status to the housing sector, government initiatives like affordable housing for all, amongst others. Over the last few years, various regulations for banks and NBFCs have been harmonised, thereby enabling the potential merger. Further, the resulting larger balance sheet would allow underwriting of large ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector, including credit to the agriculture sector."
The merger is expected to close within 18 months (Q2 / Q3 FY24), subject to completion of regulatory approvals and other customary closing conditions.
HDFC had total assets of Rs 6,23,420.03 crore, turnover Rs 35,681.74 crore and net worth of Rs 1,15,400.48 crore as on 31 December 2021.
HDFC Bank had total assets Rs 19,38,285.95 crore, turnover of Rs 1,16,177.23 crore (includes other income) and net worth of Rs 2,23,394 crore, as on 31 December 2021.
HDFC Investments and HDFC Holdings are wholly-owned unlisted subsidiaries of HDFC. These two firms are non-banking finance companies, registered with RBI, engaged in the business of investments in stocks, shares, debentures and other securities.
HDFC Investments had total assets of Rs 341.37 crore, turnover Rs 200.11 crore and net worth of Rs 292.41 crore as on 31 December 2021. HDFC Holdings had total assets of Rs 244.43 crore turnover Rs 20.88 crore and net worth of Rs 241.80 crore as on 31 December 2021.
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