HDFC Merged With HDFC Bank, The New Entity Will be Doubled; Check Details

According to S&P Global Ratings, HDFC Bank‘s planned merger with its parent company, HDFC Ltd, will increase the bank’s share and diversify its revenue.

HDFC Ltd, India’s largest mortgage lender, decided to merge with HDFC Bank, one of the country’s most valuable banks, to form a nearly $190 billion behemoth to ride a boom in home loans and consumer spending in the world’s fastest-growing major economy.

Following the news of the acquisition, the combined market capitalization of HDFC Bank and HDFC jumped to 14.22 lakh crore on Monday, surpassing the IT behemoth TCS, which has a market capitalization of over 13 lakh crore.

Apart from other conglomerates like Reliance and TCS, the HDFC twins, as they are called, are important drivers of the Nifty index.

HDFC will own 41% of HDFC Bank Ltd., a bank it helped found 28 years ago. HDFC issues mortgages to more than half of homebuyers in a country of 1.4 billion people.

S&P said in a report that does not represent a rating action that the combination will likely result in considerable market share gains for HDFC Bank, given that HDFC Ltd is India’s largest mortgage funder.

HDFC Bank’s stock is expected to rise by 42 percent, boosting the bank’s market share to over 15 percent from 11 percent now, according to S&P. HDFC Bank will remain India’s second-largest bank after the merger, but it will be twice the size of ICICI Bank.

According to the terms of the agreement, after the transaction is completed, public shareholders will own 100% of HDFC Bank, and HDFC shareholders will get 42 HDFC Bank shares for every 25 HDFC Bank shares held.

By the third quarter of the financial year 2023-2024, the merger should be complete. Sashidhar Jagdishan, the CEO of HDFC Bank, would lead the amalgamated entity.

“After the merger, HDFC Bank’s business profile will diversify, and the merged organization would have one-third of its portfolio in home loans, compared to 11% presently,” it stated.

“The merger will allow the bank to profitably cross-sell to HDFC Ltd’s enormous client base, particularly for high-yield products like insecure loans. More fee income from insurance and financial products will be generated as well “S&P Global was also added.