To create a financial services conglomerate, the largest private lender of India HDFC Bank will merge with the largest housing finance company of the country HDFC Ltd.
For 25 shares held, shareholders of this housing finance company HDFC Ltd will receive 42 shares of the bank. The existing shareholders of this finance company will own 41% of the HDFC Bank. The shares that have been held will be extinguished. Thus it is making HDFC Bank a full-fledged public company.
HDFC Bank shares jumped as much as 10%. And HDFC Ltd surged 13% after the announcement of the merger. Analysts believe that it could be the outcome of a recommendation by the Reserve Bank of India in November 2020.
The Chairman of the HDFC Ltd Deepak Parekh said that, “The resulting larger balance sheet would allow underwriting of large ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector.”
While HDFC Ltd was worth 4.44 trillion rupees, HDFC Bank had a market value of 8.34 trillion rupees.
The research analyst at Ashika Stock Broking Asutosh Mishra said, “This is a long-awaited merger. It will be beneficial for both the companies, particularly more for HDFC Ltd. It was competing in a competitive home loan market with the State Bank of India.”
