Transformation and Growth: HDFC Bank's Merger with HDFC Ltd. Creates India's Leading Financial Services Conglomerate

The shares of HDFC Bank experienced a gain of over 2% on Monday, driven by the merger of HDFC Bank and Housing Development Finance Corporation (HDFC), which officially took effect on Saturday, July 1. This merger has established HDFC Bank as the largest private lender in India, currently ranking fourth in terms of equity market capitalization. The trading day commenced with HDFC Bank's share price opening at ₹1714.90 apiece on BSE.

On Friday, HDFC Bank shares closed 1.51% higher at ₹1,701.75 apiece on BSE. Analysts suggest that following the corporate action, the stock prices have shown a strong upward movement, surpassing previous month-highs. The overall bias remains positive, with potential for the prices to extend towards ₹1,850 as the upper limit and ₹1,670 as the immediate support level.

It is important to note that while the share exchange between the owners of these two companies is scheduled for July 13, 2023, the merger itself became effective on July 1. Consequently, starting from the following week and leading up to July 13, the trading window for HDFC Ltd will be closed.

In a recent exchange filing, HDFC Bank confirmed the successful completion of the merger with HDFC Ltd, following the receipt of all necessary shareholder and regulatory clearances. The intention to merge was initially announced by HDFC Bank and HDFC Ltd on April 4, 2022, with an estimated completion window of 15 to 18 months.

According to the filing, the merged entity brings together significant synergies and is expected to create substantial value for various stakeholders, including customers, employees, and shareholders. This value will be derived from increased scale, comprehensive product offerings, balance sheet resilience, and the ability to capitalize on revenue opportunities, operating efficiencies, and underwriting efficiencies.

As part of the merger scheme, HDFC Bank will issue and allot 42 new equity shares of the face value of Re 1 each, credited as fully paid-up, to eligible shareholders for every 25 equity shares of the face value of ₹2 each fully paid-up held by them in HDFC Ltd. as of the Record Date, which is July 13, 2023.

Sashi Jagdishan, CEO & MD of HDFC Bank, expressed his confidence in the merger, highlighting it as a defining event that will allow the creation of a comprehensive financial services ecosystem. Jagdishan warmly welcomed the talented team of HDFC Ltd. into the HDFC Bank family, emphasizing agility, adaptability, and a relentless pursuit of excellence as the guiding principles moving forward.

Post-merger, HDFC Bank no longer has an identified promoter and has transformed into a financial services conglomerate offering a full suite of financial products, including banking, insurance, and mutual funds through its subsidiaries. Prior to the merger, the bank served as a distributor for these products.

The merger between India's largest Housing Finance Company, HDFC Ltd., and the largest private sector bank in the country combines the strengths of a trusted home loan brand with an institution benefiting from a lower cost of funds. The increased net worth resulting from the merger will facilitate greater credit flow into the economy, supporting the underwriting of larger loans, including infrastructure loans. This merger is expected to contribute significantly to nation-building and employment generation.

As of the merger's effective date, all employees of HDFC Ltd. have become employees of HDFC Bank. In preparation for a seamless integration, HDFC Bank has been working on integrating systems, processes, and creating a welcoming work environment for the employees transitioning from HDFC Ltd.

Following the merger, key subsidiaries of HDFC Bank include HDFC Securities Ltd., HDB Financial Services Ltd., HDFC Asset Management Co. Ltd, HDFC ERGO General Insurance Co. Ltd., HDFC Capital Advisors Ltd., and HDFC Life Insurance Co. Ltd.