Housing finance pioneer HDFC will now cease to exist and its business and services will now come under the HDFC Bank.
India’s first home finance firm HDFC is set to merge with its subsidiary HDFC Bank in what has been termed as the biggest transaction in the history of India Inc. Boards of both HDFC and HDFC Bank cleared the proposal on Friday. HDFC will now cease to exist and its business and services will be taken up by HDFC bank. The reverse merger was agreed between HDFC Bank and parent HDFC back on April 4, 2022.
What it means for the customers
From being a distributor of products, HDFC Bank will now become a financial services conglomerate offering a complete set of services from banking to insurance, and mutual funds through its subsidiaries. Key HDFC Bank arms post merger include HDFC Securities Ltd, HDB Financial Services Ltd, HDFC Asset Management Co Ltd, HDFC ERGO General Insurance Co Ltd, HDFC Capital Advisors Ltd and HDFC Life Insurance Co Ltd.
"For HDFC Bank, a home loan customer marks the beginning of a journey of having a customer in perpetuity. HDFC Bank is excited at the prospect of cross-selling an array of asset and liability products to home loan customers. This will be done seamlessly on their digitalisation platforms, all through a one-click experience.” - HDFC Chairman Deepak Parekh on what the merger brings for customers.
HDFC Bank customers will be able to avail HDFC housing products at better pricing and have access to a wider range of products. Private sector investment is expected to increase post the merger which will mean asset formation for borrowers.
For fixed deposit (FD) holders, the HDFC Bank is likely to provide HDFC housing depositors options to renew deposits or withdraw them. Depositors will get increased safety on FDs with insurance of up to Rs 5 lakh.
The new entity will be 100 percent owned by public shareholders. 41 percent of the bank will be owned by existing shareholders of HDFC. Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares they hold.
HDFC-HDFC Bank merger in numbers
HDFC Bank will become the fourth largest in the world in equity market capitalisation (valued at USD 172 billion). The transaction is valued at USD 40 billion in an all-stock deal. HDFC Bank now becomes a financial services giant with combined assets of over Rs 18 lakh crore. The total business of the merged entity stood at Rs 41 lakh crore at the end of March 2023 with combined profit of Rs 60,000 crore. HDFC Bank’s net worth will skyrocket to over Rs 4.14 lakh crore with the mega merger.
(Inputs from PTI)
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