HDFC Bank HDFC merger: What this twins merger mean for Indian stock market — explained in five points

HDFC Bank HDFC merger: Following the reverse merger, Housing Development Finance Corporation (HDFC) Ltd. is going to merge with its subsidiary HDFC Bank on 1st July 2023. The respective board of directors of HDFC Ltd and HDFC Bank have cleared the proposal for amalgamation on Friday. This means, HDFC would cease to exist from today onwards. In latest exchange filing, both entities informed the Indian stock market exchanges in this regard. 

Hence, trading window in HDFC Ltd will remain closed from Monday next week and it will remained closed till HDFC Bank HDFC merger record date, which is fixed on 13th July 2023.

HDFC Ltd informed Indian bourses about the HDFC twins merger citing, "Further to our earlier intimation made today, wherein we had informed that Saturday, July 1, 2023, would be the ‘Effective Date’ of the Scheme and the fixation of various record dates, we also wish to inform that the window for trading in the securities of the Corporation would be closed with effect from Saturday, July 1, 2023 and shall continue to remain closed up to Record Date i.e. up to Thursday, July 13, 2023 (for determining the shareholders of the Corporation who shall be issued and allotted the shares of HDFC Bank), for all the employees, designated employees and directors of the Corporation including their immediate relatives, in terms of the SEBI (Prohibition of Insider Trading) Regulations, 2015."

To understand how HDFC Bank HDFC merger will impact Indian stock market, here we list out top 5 outcomes:

1] Change in market cap: As per the information available on the official website of BSE, HDFC Bank share price ended on Friday with a market cap of ₹9,51,584.36 crore while HDFC Ltd share price finished with a market cap of ₹5,22,368.64 crore on the last session of the week gone by. This means, after amalgamation, joint market cap of HDFC Bank will be ₹14,73,953 crore, which is higher than Tata Consultancy Services or TCS market cap of ₹12,07,669.91 crore. So, after amalgamation, HDFC Bank will become second most valuable Indian company in terms of market capitalisation after Reliance Industries Ltd or RIL. RIL will continue to dominate Indian stock market with its current market capital of ₹17,25,704.60 crore. However, after merger, HDFC Bank would be a close number two in terms of market cap.

2] Weightage in Nifty" data-name="Nifty">Nifty index: After HDFC Bank HDFC merger, relative weight of HDFC Bank would be around 15 per cent as in current scenario, HDFC Bank contributes 9.23 per cent and HDFC contribute 6.16 per cent in Nifty, together they contribute 15.39 per cent in Nifty. So, Reliance Industries would no more going to remain the most dominant Nifty stock after merger as it has percent weight at around 10 per cent.

3] World's fourth largest bank: HDFC Bank HDFC merger would create world's fourth largest bank in the world after JP Morgan Chase & Co, Industrial and Commercial Bank of China Ltd (ICBC) and Bank of America Corp.

4] HDFC Bank HDFC merger ratio: After the deal getting effective from today, HDFC Bank will be completely owned by public shareholders, and existing shareholders of HDFC Ltd will own 41 per cent of the HDFC Bank. Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares they hold.

5] HDFC Bank subsidiaries: After merger, HDFC Securities, HDFC AMC, HDFC Ergo GIC, HDFC Capital Advisors and HDFC Life Insurance would become one of the key subsidiaries of HDFC Bank. So, big development in any of these companies may lead to change in price of HDFC Bank shares after the merger.