At their respective meetings on Monday, the Boards of Directors of HDFC Ltd. and HDFC Bank Ltd. approved a composite scheme for the merger of HDFC Investments Ltd. and HDFC Holdings Ltd. with and into HDFC Ltd; and HDFC Ltd with and into HDFC Bank, as well as their respective shareholders and creditors.
Closing conditions for the Scheme and the Proposed Transaction are standard. Multiple approvals are required for the program to be implemented. The subsidiaries/associates of HDFC Ltd. shall become subsidiaries/associates of HDFC Bank once the scheme takes effect.
Shareholders of HDFC Ltd. as of the record date will receive 42 HDFC Bank shares (each with a face value of 1) in exchange for 25 HDFC Ltd. shares (each with a face value of 2), and HDFC Ltd.’s equity share(s) in HDFC Bank would be extinguished as per the scheme.
As a result, when the program takes effect, HDFC Bank would be held entirely by public shareholders, with existing HDFC Ltd. shareholders owning 41% of the company.
HDFC Ltd.: Merger of Equals
“This is a merger of equals,” stated Deepak Parekh, Chairman of HDFC Ltd. Due to the adoption of RERA, the state of the housing sector’s infrastructure, and government efforts such as affordable housing for all, we believe the housing finance market is prepared to grow in leaps and bounds. Various laws for banks and NBFCs have been standardized in recent years, allowing for the eventual merger.
“Furthermore, the ensuing larger balance sheet would enable underwriting of large ticket infrastructure loans, accelerate the speed of credit expansion in the economy, promote affordable housing, and raise the quantity of credit to key sectors, including credit to agriculture,” he added.
“The product and market leadership of HDFC Limited in the housing finance business, combined with the distribution and customer leadership of HDFC Bank, enables the combined entity to offer a full suite of financial products to Indians at large, and the proposed transaction is a big step toward realizing our government’s vision of housing for all,” said Atanu Chakraborty, Chairman 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. It’s a step in the right direction, made at the appropriate moment, to help all stakeholders create value.”
“The proposed transaction ticks all the right boxes in terms of product completion, product leadership in home loans as well as 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, CEO and MD of HDFC Bank. It adds value to all of the organizations’ stakeholders, including shareholders, employees, and customers.”