HDFC Bank-HDFC Merger To Be Effective July 1

In India's biggest financial sector merger, operations of Housing Development Finance Corp. will be assimilated within HDFC Bank starting Saturday.

The respective boards of both entities met on Friday to finalise the merger. According to the swap ratios announced, a shareholder will get 42 shares of HDFC Bank Ltd. for every 25 held in HDFC Ltd. Once effective, HDFC Bank will be fully owned by public shareholders, with existing shareholders of HDFC holding 41%, it said in an exchange filing issued on Friday evening.

The corporation’s shareholding of 116.46 crore equity shares in HDFC Bank shall be extinguished post the record date for equity shares.

The board of HDFC Bank has received the certified copy of the order of the National Company Law Tribunal sanctioning the scheme, the filing said.

With July 1 set as the ‘Effective Date’ for the merger, the certified order of the NCLT sanctioning the scheme will be filed by HDFC Investments, HDFC Holdings, HDFC and HDFC Bank with the Registrar of Companies, it said.

The appointed date for amalgamation of HDFC Investments and HDFC Holdings with and into HDFC Ltd. has been set as June 30.

HDFC Bank's Memorandum of Association will be amended owing to the merger and to reflect the authorised capital of HDFC, which will be merged into the bank. The capital of HDFC Bank will be raised from Rs 650 crore to Rs 1,190.6 crore.

The merger, originally announced in April 2022, will create an entity with a loan book worth over Rs 18 lakh crore.

The shares of the housing finance company will cease to trade on the exchanges from July 13 and in the following days, its shareholders will be issued the bank shares.

In addition to the effective date and the record date for the merger, HDFC Bank has also fixed the following record dates:

• July 13: Continuation of warrants of HDFC in the name of HDFC Bank.

• July 12: Transfer of non-convertible debentures of HDFC in the name of HDFC Bank.

• July 7: Transfer of commercial papers of HDFC in the name of HDFC Bank.

Of HDFC Bank's over 8 crore customers, around 2% have availed housing loans from parent HDFC, Keki Mistry, vice chairman and chief executive officer at the housing finance company, told BQ Prime in an exclusive conversation. Moreover, only an additional 5% of the customers have a housing loan from other lenders, he said.

"Roughly, 93% have not taken a (home) loan at all. So, look at the ability to cross-sell ... There is a massive opportunity," Mistry said.

"We're truly happy to welcome the talented team of HDFC Ltd. into the HDFC Bank family. I believe our journey will be defined by agility, adaptability, and a relentless pursuit of excellence," Sashidhar Jagdishan, managing director and chief executive officer of HDFC Bank said, in a statement.

"As we navigate the path ahead, we will embrace challenges as opportunities, learn from our experiences, and strive to be the benchmark of success and integrity in the financial services industry.”

The larger net worth would allow greater flow of credit into the economy. It will also enable underwriting of larger ticket loans, including infrastructure loans and contribute further to nation-building and employment generation, the bank said in its statement.

All employees of HDFC, as on the effective date, will become HDFC Bank employees.

After the merger, key HDFC Bank subsidiaries will include HDFC Securities Ltd., HDB Financial Services Ltd., HDFC Asset Management Co., HDFC ERGO General Insurance Co., HDFC Capital Advisors Ltd. and HDFC Life Insurance Co.

As of June 30, HDFC's individual home loans rose 15% year-on-year, it said in a separate exchange filing. The non-individual loan book declined over the previous year. This was on account of scheduled repayments of earlier facilities, resolutions and a rundown on exposures to ensure compliance with banking norms.

Of the cumulative book of the mortgage lender, 84% represents individual loans, 7% construction financing, 5% lease rental discounting and 4% corporate loans, it said.

Loans outstanding that qualify as priority sector loans under banking norms stood at approximately Rs 1.1 lakh crore.