New Delhi: In a significant move, HDFC, a major housing finance company, is set to merge with its subsidiary HDFC Bank on Saturday, July 1st. The proposal has been approved by both companies' boards on Friday, marking a crucial step towards the integration. As a result of this reverse merger, HDFC Ltd, the 44-year-old institution and the country's first home finance company, will cease to exist starting from July 1.
HDFC Bank, in a regulatory filing, announced that the "Effective Date" of the amalgamation scheme will be Saturday, July 1, 2023. On this date, the certified order of the National Company Law Tribunal (NCLT) sanctioning the scheme will be filed with the Registrar of Companies (RoC) by HDFC Investments, HDFC Holdings, HDFC Limited, and HDFC Bank.
The Board of Directors of HDFC Bank, in consultation with the Board of Directors of HDFC Limited, has determined July 13, 2023, as the date for identifying the shareholders of HDFC Ltd who will be issued and allotted shares of HDFC Bank. Additionally, the continuation of warrants of HDFC Limited in the name of HDFC Bank will also take place on July 13.
Furthermore, the board has scheduled July 12, 2023, for the transfer of non-convertible debentures, and July 7 for the transfer of commercial papers from HDFC Ltd to HDFC Bank.
This landmark transaction, hailed as the largest in the history of India Inc, was agreed upon on April 4, 2022. Under the all-stock deal worth USD 40 billion, HDFC Bank, the largest pure-play mortgage lender, will acquire its parent company, creating a financial services powerhouse with a combined asset value of over Rs 18 lakh crore.
As of March 2023, the merged entity's total business amounted to Rs 41 lakh crore, and its net worth is projected to exceed Rs 4.14 lakh crore. The cumulative profit of both entities at the end of March 2023 stood at approximately Rs 60,000 crore.
With the merger, the HDFC twins' combined shares will hold the highest weighting on the indices, accounting for nearly 14%—significantly surpassing the current heavyweight Reliance Industries, which carries a weightage of 10.4%.
Upon completion of the merger, HDFC Bank will be fully owned by public shareholders, while existing HDFC shareholders will possess a 41% stake in the bank. For every 25 shares of HDFC held, HDFC shareholders will receive 42 shares of HDFC Bank.
This integration of HDFC Bank and HDFC brings together their complementary strengths and is poised to generate substantial value for various stakeholders, including customers, employees, and shareholders. The combined entity will benefit from increased scale, a comprehensive product portfolio, enhanced balance sheet resiliency, and the ability to leverage synergies across revenue opportunities, operational efficiencies, and underwriting processes.
