Context
HDFC Bank and HDFC Ltd announced the merger of the two entities, setting the stage for one of the biggest deals in the Indian financial sector.
Plan of merger
- As per the transaction structure, HDFC Limited, India’s largest housing finance company with Assets Under Management (AUM) worth Rs 5.26 trillion and a market cap of Rs 4.44 trillion will merge with HDFC Bank, India’s largest private sector bank by assets with a market cap of Rs 8.35 trillion.
- The subsidiary or associates of HDFC Limited will also be transferred to HDFC Bank.
Share swap ratio
- Shareholders of HDFC Limited, as on record date, will receive 42 shares of HDFC Bank for 25 shares of HDFC Limited.
How will the ownership change?
- Post the merger, HDFC Limited’s shareholding in HDFC Bank will be extinguished and HDFC Bank will be 100 per cent owned by public shareholders.
- Existing shareholders of HDFC Limited will own 41% of HDFC Bank.
How will the merger benefit the two entities?
- While this will improve the ability to cross-sell products to a larger customer base, the move will help them leverage their distribution across urban, semi-urban and rural geographies.
- The combined balance sheet of Rs 17.87 trillion and Rs 3.3 trillion net worth will enable larger underwriting at scale.
