The merger will create one of India’s largest financial conglomerates able to cross-sell its products to more than 68 million customers, according to a filing to the India stock exchange on Monday.
“The product and market leadership of HDFC Limited in the housing finance business and the distribution and customer leadership of HDFC Bank enables the combined entity to offer a full suite of financial products to Indians at large,” Atanu Chakraborty, chairman of HDFC Bank, said in a statement.
HDFC Chairman Deepak Parekh described the merger as “a coming together of equals” and added that “our customers will be the biggest beneficiary.”
“The merger makes the combined entity strong enough to not only counter competition but make the mortgage offering even more competitive,” he said.
HDFC’s shareholders will receive 42 shares in HDFC Bank for every 25 shares held. HDFC Bank will be wholly owned by the public and existing shareholders of HDFC will own 41% of HDFC Bank after the merger is completed, which could come as late as the third quarter of 2024. The deal will be subject to the approval of the shareholders of HDFC and HDFC Bank, the Reserve Bank of India, India’s stock exchanges, the Securities and Exchange Board of India and possibly other regulatory and statutory agencies.
The merger will create a conglomerate with a balance sheet of 17.87 trillion rupees ($236.5 billion) and net worth of 3.3 trillion rupees that will enable it to do underwriting at a larger scale.
HDFC Bank currently has more than 6,300 branches that serve more than 3,000 cities and towns across India. Around half of its branches are located in semi-urban or rural locations that will benefit from the growth of affordable housing.
After the merger, mortgages will be the largest contributor to the firm’s loan book, accounting for 33% and the segment is growing at a rapid pace. HDFC Bank’s mortgages recorded a CAGR of 24.5% and reached a total of 702.2 billion rupees last year.
HDFC Bank’s CEO Sashidhar Jagdishan will head the merged entity. HDFC Bank was named on last year’s list of the World’s Best Banks, which Forbes publishes in partnership with market research firm Statista.
Shares of the two Mumbai-based firms soared on the announcement. HDFC’s stock surged as much as 16.4%, while HDFC Bank jumped almost 14.3%.