Impact & Rationale: Behemoth HDFC-HDFC Bank Merger, Shares Zoom 16% & More

By Malvika Gurung — Shares of the HDFC (NS:) twins, HDFC Ltd zoomed 15.6% to Rs 2,835 apiece and HDFC Bank (NS:) surged 13.6% to Rs 1,710.55 apiece at the time of writing.

On Monday, the mortgage lender HDFC’s board approved the merging of its wholly-owned subsidiaries HDFC Investments Ltd and HDFC Holdings Ltd with HDFC Bank, and its shareholders and creditors.

The merger between the two heavyweights has set the stage for one of the biggest financial deals in the country and is likely to create the third-largest entity in terms of market capitalization in the domestic market.

As per HDFC Bank, the merger will provide a large-scale widened customer base to the lender, enabling it to build its housing loan portfolio. It will create meaningful value for many stakeholders, given the increased scale, product offering, balance sheet resiliency, and operating efficiencies, among others, that come with the transaction.

The total assets of HDFC Ltd at Rs 5.26 trillion and a market valuation of Rs 4.44 trillion will merge with the country’s largest lender HDFC Bank.

The mortgage lender has 445 offices set up across the country, with leadership in the home loans segment developed over the past 45 years, and a loan book of over 90 lakh dwelling units.

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HDFC Bank, with a customer base of over 6.8 crores, will provide them with flexible mortgage offerings in a cost-effective and efficient manner.

As per the share exchange ratio, shareholders of HDFC will receive 42 shares of HDFC Bank for every 25 shares held, as on record date, and it has been determined based on a joint valuation report issued by the independent valuers, supported by a fairness opinion by a SEBI registered merchant banker, the lender said.

Read Also: HDFC-HDFC Bank Merger: Financial Heavyweight To Form, HDFC Twins Soar Up to 15%

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