HDFC Bank said on Monday that its board had approved the merger of HDFC Investments and HDFC Holdings into HDFC and HDFC into HDFC Bank.
As part of the transaction, shareholders of HDFC Ltd will receive 42 shares of the bank for every 25 shares held. Following the closing of the transaction, the existing shareholders of HDFC Ltd will own 41% of HDFC Bank.
The shares held by the housing finance company in the lender will be extinguished, making HDFC Bank a public company in its own right. Subsidiaries and associates of HDFC Ltd will transition to HDFC Bank.
“The Board of Directors of HDFC Bank Limited (“HDFC Rank”), at its meeting held today, 04 April 2022, notably approved a Composite Merger Plan (“Plan”) for the merger of: ( i) HDFC Investments Limited and HDFC Holdings Limited, in and with Housing Development Finance Corporation Limited (“HDFC Limited”); and (ii) HDFC Limited in HDFC Bank, and their respective shareholders and creditors,” the bank said in a filing. of scholarship.
The merger is subject to approval by the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Competition Commission of India, National Housing Bank (NHB), Insurance Regulatory and Development Authority of India, the Pension Funds Regulatory and Development Authority, the National Company Law Tribunal, the stock exchanges and other statutory and regulatory authorities, and respective shareholders and creditors, in accordance with applicable law
Explaining the rationale for the deal, HDFC Bank said the proposed transaction would create significant balance sheet and net worth, which would also allow for larger loans to be taken out, including infrastructure loans. Following the merger, HDFC Bank’s 68 million customers will be offered mortgages as a commodity in a transparent manner.
The bank also said HDFC invested capital and developed skills and opened 445 offices across the country. These offices can be used to sell the full range of HDFC and HDFC Bank products.
The private sector lender said that current regulatory changes, including higher regulatory standards for non-bank financial companies (NBFCs) on par with banks, reduction in SLR rates, creation and deepening of the market Priority Sector Loan (PSL) certificates, also created a case for merging the two entities.
“The combined entity will bring together the complementary strengths of both organizations, enabling a rewarding customer relationship. After the consolidation, HDFC Bank customers will be offered mortgages as a commodity in a transparent manner. HDFC Bank will also leverage the long-term mortgage relationship to offer varied credit and deposit products through better insights throughout the customer life cycle. This will result in an improved value proposition and customer experience for all customers of the combined entity,” the bank said.
The proposed transaction will reduce the proportion of HDFC Bank’s exposure to unsecured loans and also strengthen the capital base.
“HDFC Bank has access to funds at lower cost due to its high level of Current Account Deposits and Savings (CASA). With the merger of HDFC with HDFC Bank, HDFC Bank will be able to offer more competitive housing,” he said.
Deepak Parekh, chairman of HDFC Ltd, said the deal was a merger of equals.
Sashi Jagdishan, CEO and Managing Director of HDFC Bank, said: “The proposed transaction ticks all the right boxes in terms of completion of product offerings, leadership in home lending as well as other retail asset products. , nationwide distribution force and customer base. that can be leveraged to sell a full range of financial products. This is added value for all stakeholders in both organizations, including shareholders, employees and customers.”
HDFC had total assets worth ₹6,23,420.03 crore and a net worth of ₹1 15,400.48 crores as of December 31, 2021. HDFC Bank, on the other hand, had total assets of ₹19.38 lakh crore and a net worth of ₹2.23 lakh crore, as of December 31, 2021.
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