HDFC Bank, HDFC stocks soar 8% on proposed merger deal; Both stocks among top Nifty 50 gainers

4 Apr 2022 , 01:04 PM

Shares of HDFC Bank and HDFC zoomed over 8% on the stock exchange and was among the top Nifty 50 gainers on Monday’s trade. HDFC Bank has witnessed over a 12-fold jump in volume, while HDFC has recorded a near 6-fold jump in trading volume so far on Friday.

On Monday, HDFC said in an exchange note that it will merge with private lender HDFC Bank. Under the proposed deal, shareholders of HDFC Ltd will receive 42 shares of the bank for 25 shares held.

The companies expect the deal -- subject to regulatory approvals -- to be completed in the second or third quarter of the financial year starting in April 2023.

Meanwhile, shares of HDFC Bank Ltd are currently trading at Rs1,626.70 up by Rs120.4 or 7.99% from its previous closing of Rs1,506.30 on the BSE.

Housing Development Finance Corporation Ltd is currently trading at Rs2,625.70 up by Rs174.75 or 7.13% from its previous closing of Rs2,450.95 on the BSE.

The merger of India’s largest Housing Finance Company, HDFC Limited, with the largest private sector bank in India, HDFC Bank, will enable seamless delivery of home loans and leverage on the large base of over 68 million customers of HDFC Bank and inter alia improve the pace of credit growth in the economy.

HDFC Limited, over the last 45 years has developed one of the best product offerings, delivered in a cost-effective manner and in an efficient turn-around time, making it a leader in the housing finance business.

The proposed transaction is to create a large balance sheet and net worth that would allow a greater flow of credit into the economy. It will also enable the underwriting of larger ticket loans, including infrastructure loans, an urgent need of the country.

The combined entity will bring together complementary strengths of the two organizations, enabling a rewarding customer relationship. Post the combination, HDFC Bank’s customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights throughout the customer life-cycle. This will result in an enhanced value proposition and customer experience for all customers of the combined entity.

The Boards of HDFC Limited and HDFC Bank believe that the merger will create long-term value for all stakeholders, including customers, employees and shareholders of both entities. The amalgamation of the two entities will provide further impetus to the Government’s vision of “Housing for All”.

"The share exchange ratio for the amalgamation of the Corporation (HDFC Ltd) with and into HDFC Bank shall be 42 equity shares (credited as fully paid up) of the face value of Re 1 each of HDFC Bank for every 25 fully paid-up equity shares of the face value of Rs2 each of the Corporation," HDFC stated in a regulatory filing.

"The merger is subject to the receipt of requisite approvals from the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), the Competition Commission of India, the National Housing Bank (NHB), the Insurance and Regulatory and Development Authority, the Pension Fund Regulatory and Development Authority, the National Company Law Tribunal, BSE Limited and the National Stock Exchange of India Limited and other statutory and regulatory authorities, and the respective shareholders and creditors," HDFC Bank added.