HDFC Bank and mortgage lender HDFC Ltd announce 'merger of equals'

India's largest private lender HDFC Bank will merge with housing finance firm HDFC Ltd, the companies said on Monday.

Shareholders of HDFC Ltd will receive 42 shares of the bank for 25 shares held. Existing shareholders of HDFC Ltd will own 41 per cent of HDFC Bank. Shares held by the housing finance company in the lender will be extinguished, making HDFC Bank a full-fledged public company.

HDFC Bank will be 100 per cent owned by public shareholders. Existing shareholders of HDFC Ltd will own 41 per cent of HDFC Bank. The transaction is expected to be completed in 18 months, subject to regulatory approvals.

“Post the combination, HDFC Bank’s customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights through-out the customer life-cycle. This will result in an enhanced value proposition and customer experience for all customers of the combined entity”, said the lender in a statement.

“This is a merger of equals”, said Deepak Parekh, Chairman HDFC Limited. “Over the last few years, various regulations for banks and NBFCs have been harmonised, thereby enabling the potential merger”, he said.

Morgan Stanley India were financial advisors to HDFC Bank and Bank of America Merrill Lynch (BofA) Securities were financial advisors to HDFC Limited for the proposed transaction.

Shares of HDFC Bank and HDFC jumped 9.62 per cent and 13.49 per cent to Rs 1,651.15 and Rs 2,781.55 respectively post the announcement of the amalgamation.

"The proposed transaction ticks all the right boxes in terms of completion of product offerings, product leadership in home loans as with other retail assets products, distribution strength across the country and a customer base that can be leveraged to cross-sell a complete suite of financial products,” said Sashi Jagdishan, chief executive officer (CEO) and managing director of HDFC Bank.

“With the leadership that we have built in housing finance and the deep understanding of the housing market across various economic cycles, this transaction helps in realizing the potential of what HDFC’s housing finance business can achieve by leveraging the distribution and customer base of HDFC Bank,” said Keki M. Mistry, vice chairman and CEO of HDFC Ltd.