Housing Development Finance Corporation (HDFC) and HDFC Bank have announced a merger. Under this deal, HDFC will have a 41% stake in HDFC Bank. HDFC today, i.e. on Monday, said that in the board meeting today, HDFC has been approved for merger with HDFC Bank. Shareholders and creditors (debtors) of the company will also be involved in this merger. The merger is expected to be completed by the second or third quarter of the next financial year.
HDFC said the proposed deal is aimed at improving HDFC Bank's housing loan portfolio and expanding its existing customer base. This merger of HDFC and HDFC Bank will be completed by the second or third quarter of FY 2024.
HDFC's assets are 6.23 lakh crores and HDFC Bank's 19.38 lakh crores
HDFC has total assets of Rs 6.23 lakh crore and a turnover of Rs 35,681.74 as of December 31, 2021. On the other hand, the total assets of HDFC Bank are Rs 19.38 lakh crore.
The great rise in the shares of both companies
As soon as the news of the merger came, the shares of both companies are seeing a great rise. HDFC stock was up 13.60% on BSE at 10 am. Similarly, HDFC Bank stock was also up about 10%.
What is the difference between HDFC and HDFC Bank?
HDFC is a housing finance company. Which provides loans for the purchase of other properties including houses and shops. On the other hand, HDFC Bank does all the work related to the bank like all types of loans, account opening or FD, etc.
Why did this merger happen?
The need for this merger was already felt amidst increasing competition from state-run banks and new-age fintech companies. The management has bet that the merged entity will have a huge balance sheet, which will increase its competitiveness in the market.
This merger could be more profitable for HDFC Ltd as its business is less profitable. From the perspective of HDFC Bank, with this merger, it will be able to strengthen its loan portfolio. It will be able to offer its products to more people.
What effect will this have on shareholders?
Under the merger of HDFC Limited and HDFC Bank, for every 25 shares of HDFC Limited, 42 shares of HDFC Bank will be given. That is, if you have 10 shares of HDFC Limited, then you will get 17 shares under the merger.
this equals merger
HDFC Ltd Chairman Deepak Parekh said that this is a merger of equals. We believe that due to the implementation of RERA, the infrastructure status of the housing sector, and government initiatives on affordable housing, among other things, there will be a big boost in the housing finance business.
Deepak Parekh further said that in the last few years many regulations of banks and NBFCs have been improved. This created the possibility of a merger. This allowed the large balance sheet to arrange large infrastructure loans. At the same time, the credit growth of the economy increased. Affordable housing got a boost and all priority sectors including agriculture were given more credit than before.
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