HDFC Bank completes merger with the biggest mortgage lender in the nation

3 Jul 2023 , 11:57 AM

In a move that sets the new organization against the biggest banks in the world, India’s largest private lender HDFC Bank and Housing Development Finance Corporation have finalized their merger. The merger was approved by shareholders and regulatory authorities, and it became official on July 1.

According to market capitalization, the combined company will rank after JPMorgan Chase, the Industrial and Commercial Bank of China, and Bank of America.

Sashi Jagdishan, CEO of HDFC Bank, said on Friday, ‘This is a defining event in our journey, and I’m confident that our combined strength will enable us to create a holistic ecosystem of financial services.’ 

He stated in a press release that while he and his team navigated the future, they would ’embrace challenges as opportunities, learn from our experiences, and strive to be the benchmark of success and integrity in the financial services industry.’

The largest home loan provider in India, Housing Development Finance Corporation, was acquired by HDFC Bank in an all-stock deal valued at $40 billion in April of last year.

According to Nilesh Shah, managing director of Kotak Mahindra Asset Management, who talked to ET, the ‘common culture’ shared by both businesses was a key factor in the merger’s successful completion.

HDFC shareholders will receive 42 shares of HDFC Bank for every 25 shares they own, and HDFC will cease operations on the Indian stock market on 13 July. 

The new entity now holds a market cap of approximately $172 billion, Rajan said, adding it will become India’s second most-valued company by market cap after Reliance Industries. In the days to come, Shah told ET, ‘These two powerhouses joining forces should make a material impact on growth and expanding the client base.’ They must take use of these synergies to build an organization that is even more effective than the one that now exists, he said.

According to him, the merger was ‘inevitable,’ and it now gives clients access to a variety of services and a larger distribution network.

‘In this situation, you have the cases of a pure bank and a mortgage lender, and you were able to uncover the synergies there. In the same way, she continued, ‘I think those will start playing out as well [in a merger] if there are other freestanding organizations that specialize in specialized services — which may be complementary to a larger bank].

As of right now, HDFC Bank might be included in the MSCI Emerging Market Index, according to Shah.

According to Shah, the merger creates a ‘fast-growing opportunity’ for foreign investors wishing to engage in India’s banking industry through the new firm. 

Investors felt secure owning it despite the fact that it was always a non-index bet. Being included in the index will now significantly increase the number of new investors in HDFC Bank, according to Shah.

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