Winning Business Desk
Mumbai. Housing Development Finance Corporation (HDFC) and HDFC Bank have announced a merger. Under this deal, HDFC will have 41% stake in HDFC Bank. HDFC said that board meeting has decided and approved for merger with HDFC Bank. Shareholders and creditors (debtors) of the company will also be involved in this merger. HDFC said the proposed deal is aimed at improving HDFC Bank's housing loan portfolio and expanding its existing customer base. This merger of HDFC and HDFC Bank will be completed by the second or third quarter of FY 2024. After the news of the merger, the shares of both the companies are seeing great growth.
HDFC's assets 6.23 lakh crores and HDFC Bank's 19.38 lakh crores
HDFC has total assets of Rs 6.23 lakh crore and turnover of Rs 35,681.74 as of December 31, 2021. On the other hand, the total assets of HDFC Bank is Rs 19.38 lakh crore. After the merger of these two companies, HDFC Bank will become the second largest company in the country. As soon as the news of the merger came, the shares of both the companies witnessed a great rise. HDFC stock was up 13.60% on BSE at 10 am. Similarly, HDFC Bank stock was also up about 10%. At 2 pm, the shares of both the companies are seeing an increase of 8%..
What is the difference between HDFC and HDFC Bank?
HDFC is a housing finance company, which provides loans for the purchase of other properties including houses and shops. On the other hand, HDFC Bank does all the work related to the bank like all types of loans, account opening or FD etc. The need for this merger was already felt amidst increasing competition from state-run banks and new-age fintech companies. The management has bet that the merged entity will have a huge balance sheet, which will increase its competition in the market.
This merger could be more profitable for HDFC Ltd as its business is less profitable. From the perspective of HDFC Bank, with this merger it will be able to strengthen its loan portfolio. It will be able to offer its products to more people.
What effect will this have on shareholders?
Under the merger of HDFC Ltd and HDFC Bank, for every 25 shares of HDFC Ltd, 42 shares of HDFC Bank will be given. That is, if you have 10 shares of HDFC Limited, then you will get 17 shares under the merger. HDFC Ltd Chairman Deepak Parekh said that this is a merger of equals. We believe that due to the implementation of RERA, infrastructure status to the housing sector, government initiatives on affordable housing, among other things, there will be a big boost in the housing finance business. Deepak Parekh further said that in the last few years many regulations of banks and NBFCs have been improved. This created the possibility of a merger. This gave an opportunity to the large balance sheet to arrange large infrastructure loans. At the same time, the credit growth of the economy increased. Affordable housing got a boost and all priority sectors including agriculture were given more credit than before.