Bandhan Bank, Gruh Finance decline on media reports suggesting their merger

Bandhan Bank has dipped 5 per cent to Rs 504, falling 7 per cent from its opening level on the BSE, while Gruh Finance slipped 4 per cent to Rs 307, declining 7 per cent from intra-day high level.

Shares of Bandhan Bank and Gruh Finance have fallen by up to 5 per cent on the BSE in intra-day trade in an otherwise firm market amid reports of a merger between the two.

According to media reports, Bandhan Bank and Housing Development Finance Corporation (HDFC)-controlled Gruh Finance are set to merge through a share swap deal.

Bandhan Bank has dipped 5 per cent to Rs 504, falling 7 per cent from its opening level on the BSE. The stock was trading lower for the fourth straight day, down 9.5 per cent during the period. Gruh Finance slipped 4 per cent to Rs 307, declining 7 per cent from intra-day high level.

Citing two people aware of the development, Mint said Bandhan Bank is set to acquire mortgage lender Gruh Finance via a share swap, a move aimed at cutting the bank’s promoter holding and expanding its housing finance portfolio.

As per the Reserve Bank of India's norms, Bandhan Bank has to bring down the shareholding of its non-operative financial holding company Bandhan Financial from 82.3 per cent to 40 per cent.

Shareholders of Gruh Finance, which is 57.83 per cent owned by HDFC, will receive three shares of Bandhan Bank for every five shares held in the home financier, the report said.

The merger would result in Bandhan founder Chandra Shekhar Ghosh bringing down his promoter holding to just above 60%. HDFC, which owns 58 per cent in Gruh, may end up with over 10 per cent stake in the combined entity, which it plans to cut further through stock exchange off-loading before the merger gets regulatory approvals, the Times of India report suggested.

A formal announcement could come this week—as early as Monday evening or Tuesday. Investment bankers were roped in to formalize the deal-making negotiated directly between the dominant shareholders of the two entities, added the report.

Earlier, on December 23, 2018, Bandhan Bank, as well as Gruh Finance, had denied the news of the merger.

“Bandhan Bank evaluates various opportunities on a continuous basis and the Bank, as a matter of policy, does not comment on market speculation. If and when any proposal warranting such disclosure, the Bank will do the same as required under the SEBI regulations,” Kolkata-based private lender said in an exchange clarification to the news report.

In this connection, we would like to state that as a business strategy, the company regularly explores various business opportunities for the sale of its loan assets and other feasible modes of organic and inorganic growth; however there is no decision taken by the Board of Directors of the company, Gruh Finance had said.