MUMBAI: Housing finance major HDFC will amalgamate itself with HDFC Bank in corporate India’s largest merger to date, creating a financial behemoth with a loan book second only to that of the State Bank of India upon completion of the transaction in 12-18 months.
Shareholders of HDFC will receive 42 shares of HDFC Bank for every 25 shares they hold as on the record date, while promoter HDFC’s 21% stake in the bank will be extinguished, making HDFC Bank a 100% public-owned company. HDFC shareholders will own 41% of the merged entity, making the structure relatively more lucrative for them.
As the 21% stake that the promoter holds in HDFC Bank is extinguished, the legroom for foreign portfolio investor ownership would widen by 7%, said Keki Mistry, vice chairman and CEO of HDFC. This could raise the foreign ownership in the combined entity to an estimated 66% against RBI’s cap of 74% foreign ownership in a private bank.
While HDFC, which has cumulatively financed over 9 million dwelling units, gets access to the bigger distribution network of the bank (6,300 branches) and low-cost funds, HDFC Bank will offer 70% of its over 6.8 crore customer base to HDFC.