HDFC Bank said the Reserve Bank of India (RBI) has approved its amalgamation with Housing Development Finance Corporation (HDFC). The merged entity will be twice the size of ICICI Bank, the second largest private bank in the country, and will shrink the gap between HDFC Bank and market leader State Bank of India (SBI).
Once all approvals are in place, HDFC Bank will become a 100% publicly owned institution, with HDFC’s 21% promoter holding getting extinguished. Sashidhar Jagdishan, who became MD & CEO of HDFC Bank in October, 2020 will lead the merged entity.
The merger would be the largest in Indian corporate history, creating a financial behemoth with a $169-billion market capitalisation (the second-largest in India) and will be among the 10 most valued banks in the world. Shareholders of HDFC will receive 42 shares of HDFC Bank for 25 shares of HDFC.
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The merged entity will be twice the size of ICICI Bank, the second largest private bank in the country, and will shrink the gap between HDFC Bank and market leader State Bank of India (SBI).
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The merger will result in a sharp rise in competitive intensity in the industry given the new HDFC entity will have a book of close to Rs 18 trillion, which is twice the size of ICICI Bank’s book and the fairly deep distribution franchise.
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Last week, the two stock exchanges had given their go-ahead to the proposed merger. The amalgamation remains subject to some other statutory and regulatory approvals, including those from the Competition Commission of India, the National Company Law Tribunal, other applicable authorities and the respective shareholders and creditors of the two entities.
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As of April 1, 2022, the market capitalisation of HDFC Bank was ₹8.36 lakh crore ($110 billion) and that of HDFC ₹4.46 lakh crore ($59 billion).
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Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares held.
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The merger, first announced in April this year, is expected to close in the next 12 to 18 months.
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The board of Housing Development Finance Corporation (HDFC) on 4th April 2022 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.
