HDFC Ltd-HDFC Bank merger announcement pushes share values up
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New Delhi: The country's largest housing finance company HDFC Ltd announced its merging with the country's largest private sector lender HDFC Bank.
A regulatory filing also claimed that the amalgamation of the two entities is expected to be completed over the next 18 months given the formalities involved in the merging process.
The scheme of amalgamation will be subject to various regulatory approvals, including from the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi), HDFC Bank said in the filing on Monday.
The announcement of the merger led to a sharp rise in the share prices of the two entities which were up by over 7 per cent in the early trading hours.
Under the proposed deal, share exchange ratio will be 42 equity shares each of HDFC Bank for every 25 equity shares held in HDFC Ltd.
The merger will be benefiting for both the entities as for the HDFC Bank, which has access to funds at lower costs due to its high level of current and savings accounts deposits (CASA), with the merger it can offer more competitive housing products.
Besides, the merger will also strengthen the capacity to cross-sell products to a larger customer base, the move will help them leverage their distribution across urban, semi-urban and rural geographies.
"... after considering the recommendation and report of the Audit Committee and the Committee of Independent Directors, the Board of Directors of HDFC Bank, at its meeting held on April 4, 2022 approved a composite scheme of amalgamation HDFC Investments and HDFC Holdings, into and with Housing Development Finance Corporation Limited (HDFC Ltd); and HDFC Ltd into HDFC Bank, and their respective shareholders and creditors," the filing said.