HDFC Bank, HDFC shares continue to soar in one of the biggest M&A deals of 2022
2 min read 04 Apr 2022, 02:52 PM ISTHDFC Bank-HDFC merger: The combined market capitalisation of HDFC Bank and HDFC soared to ₹14.22 lakh crore on Monday after the deal announcement
PremiumHDFC Bank and HDFC shares continue to soar in noon deals following the massive announcement merger between both the companies. HDFC Bank was last up 9.21% at ₹1,644.75 apiece on NSE. The stock zoomed nearly 14% in intra-day deals earlier in the morning.
Meanwhile, mortgage lender Housing Development Finance Corp. (HDFC Ltd) shares were also last up nearly 9% in afternoon deals at ₹2,671.95 on NSE. The stock soared almost 20% in morning deals.
The combined market capitalisation of HDFC Bank and HDFC soared to ₹14.22 lakh crore on Monday after the deal announcement, surpassing the IT giant TCS which has a market cap over ₹13 lakh crore.
In one of the biggest M&A deals this year, HDFC Ltd, India’s biggest mortgage lender, agreed to merge with country’s most valuable banks HDFC Bank to create an almost $190-billion behemoth to ride a boom in home loans and consumer spending in the world’s fastest-growing major economy.
HDFC twins, as they are popularly known, are key drivers of the Nifty index apart from other conglomerates like Reliance and TCS.
HDFC, which issues mortgages to more than half the home buyers in a country of 1.4 billion people, will hold 41% of HDFC Bank Ltd., a bank it helped found 28 years ago.
The transaction, which will create one of India’s largest financial services entities, follows a proposal by the banking regulator for large non-banking finance companies to convert into banks to avoid a repetition of the nation’s massive shadow lending crisis in 2018. India’s emergence from the pandemic and an improvement in the labor market has helped boost consumer demand and improve lenders’ retail portfolios.
According to the deal terms, once the deal is complete, HDFC Bank will be 100% owned by public shareholders and HDFC shareholders will get 42 shares of HDFC Bank for 25 shares held.
The merger is expected to be completed by third quarter of financial year 2023-2024. HDFC Bank’s CEO Sashidhar Jagdishan will head the merged entity.
Addressing a joint press conference with top other top executives, HDFC Chairman Deepak Parekh said a number of regulatory approvals are required to complete the process of merger of HDFC and HDFC Bank.
"Only upon attaining all approvals by RBI, SEBI and such other regulatory approvals, the merger will become effective. HDFC will merge with HDFC Bank, and shareholders of HDFC will receive shares of HDFC Bank in exchange of the shares held in HDFC at the approved share exchange ratio," Parekh said.
The combined balance sheet of merged entity will be ₹17.87 lakh crore and the net worth to be ₹3.3 lakh crore, according to Parekh.
