RBI gives Go-ahead for HDFC Bank and HDFC Ltd merger

5 Jul 2022 , 12:09 PM

On Monday (04-07-2022), HDFC Bank announced that the RBI has approved its parent company HDFC Ltd.'s petition to combine with itself. A $40 billion acquisition between HDFC Bank and the largest domestic mortgage lender was announced on April 4 and is being hailed as the largest transaction in the corporate history of India. This would create a financial services behemoth.

The Reserve Bank of India (RBI) sent a letter to HDFC Bank on July 4th, 2022, in which it stated that it had "no problem" with the Scheme as long as certain requirements were met, the bank stated in a regulatory filing. According to the statement, the merger proposal is still pending approval from a number of statutory and regulatory bodies, including the National Company Law Tribunal (NCLT), the Competition Commission of India (CCI), and other relevant agencies as well as the respective shareholders and creditors of the two companies.

Both the BSE and NSE stock markets approved the planned merger earlier this week. The aggregate asset base of the proposed business will be close to Rs 18 lakh crore. Depending on regulatory permissions, the merger is anticipated to be finished by the second or third quarter of FY24.

Once the agreement is in place, existing HDFC shareholders will own 41% of the bank, making public shareholders the sole owners of HDFC Bank. For every 25 HDFC shares owned, each shareholder will receive 42 HDFC Bank shares.

The business is instructed to provide information on all measures taken by Sebi or any other regulator against any of the entities, its directors, promoters, and promoter group, in the petition that will be submitted to the NCLT, according to the observation letter from the BSE. The corporation must make sure that only amendments required by courts or regulatory bodies may be made to the proposed plan, according to the statement.

The planned equity shares issued under the program are to be required to be in dematerialized form exclusively, it added, and the merged business has been told of this. As of the December 2021 balance sheet, the combined balance sheet will be valued at Rs 17.87 lakh crore, and the net worth would be Rs 3.3 lakh crore.

The market capitalization of HDFC Bank was Rs. 8.36 lakh crore (USD 110 billion) as of April 1, 2022, and that of HDFC was Rs. 4.46 lakh crore (USD 59 billion). After the merger, HDFC Bank, which is now the third-largest lender, would be twice as big as ICICI Bank.