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Competition watchdog CCI on Tuesday granted its approval to mortgage lender HDFC to acquire a certain stake in HDFC Life Insurance Company and HDFC ERGO General Insurance Company Ltd.
These approvals will help pave the way for the merger of HDFC into HDFC Bank, expected to be finalised by the third quarter of this financial year.
In April, the Reserve Bank also allowed HDFC Bank or HDFC to increase shareholding in HDFC Life Insurance Company and HDFC ERGO General Insurance Company to over 50 per cent prior to the effective date of the merger.
The Competition Commission of India (CCI), in a statement said it has approved the proposed combination involving acquisition of additional shareholding of HDFC Life Insurance Company Limited by Housing Development Finance Corporation Limited (HDFC).
In another statement, the fair trade regulator said it has also cleared acquisition by HDFC of certain additional shareholding of HDFC ERGO General Insurance Company Limited.
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In both cases, the merged entity HDFC Bank (after the effective date of the proposed amalgamation) will hold over 50 per cent of the shareholding of the two insurance companies, according to CCI.
Termed as the biggest transaction in India's corporate history, HDFC Bank on April 4 last year agreed to take over the biggest domestic mortgage lender in a deal valued at about USD 40 billion, creating a financial services titan.
The proposed entity will have a combined asset base of around Rs 18 lakh crore.
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 they hold.
Deals beyond a certain value require approval from CCI, as it keeps a tab on unfair business practices in the market place.
