scorecardresearch
Follow Us:
Friday, July 01, 2022

Explained: Why are HDFC Limited and HDFC Bank merging, and what will be its impact?

HDFC-HDFC Bank merger: The transaction is expected to close over the next 18 months, subject to completion of regulatory approvals and other customary closing conditions.

Written by Sandeep Singh , George Mathew , Edited by Explained Desk | Mumbai |
Updated: April 7, 2022 10:21:30 am
HDFC Bank said that the transaction is expected to close over the next 18 months. (File Photo)

HDFC Bank and HDFC Ltd on Monday announced the merger of the two entities, setting the stage for one of the biggest deals in the Indian financial sector. The announcement of the merger led to a sharp rise in the share prices of the two entities which were up by over 7 per cent in the early trading hours.

HDFC Bank said that the transaction is expected to close over the next 18 months, subject to completion of regulatory approvals and other customary closing conditions.

What is the plan of merger?

As per the transaction structure, HDFC Limited, India’s largest housing finance company with Assets Under Management (AUM) worth Rs 5.26 trillion and a market cap of Rs 4.44 trillion will merge with HDFC Bank, India’s largest private sector bank by assets with a market cap of Rs 8.35 trillion.

Best of Express Premium
UPSC Key-July 1, 2022: Why to read ‘Office of Chief Minister’ or ‘Sponge ...Premium
A century old, how Gita Press came to be ‘leading purveyor of print...Premium
Explained: 5 ways in which the iPhone changed the world in 15 yearsPremium
Explained: What unchanged small savings rates mean for banks, saversPremium

The subsidiary or associates of HDFC Limited will also be transferred to HDFC Bank

What is the share swap ratio of the transaction?

Shareholders of HDFC Limited, as on record date, will receive 42 shares of HDFC Bank for 25 shares of HDFC Limited.

How will the ownership change?

Post the merger, HDFC Limited’s shareholding in HDFC Bank will be extinguished and HDFC Bank will be 100 per cent owned by public shareholders. Existing shareholders of HDFC Limited will own 41% of HDFC Bank.

How will the merger benefit the two entities?

While this will improve the ability to cross-sell products to a larger customer base, the move will help them leverage their distribution across urban, semi-urban and rural geographies. The combined balance sheet of Rs 17.87  trillion and Rs 3.3 trillion net worth will enable larger underwriting at scale.

Newsletter | Click to get the day’s best explainers in your inbox

UPSC KEY Have you seen our section dedicated to helping USPC aspirants decode daily news in the context of their exams?

📣 Join our Telegram channel (The Indian Express) for the latest news and updates

For all the latest Explained News, download Indian Express App.

  • Newsguard
  • The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
  • Newsguard
0 Comment(s) *
* The moderation of comments is automated and not cleared manually by indianexpress.com.
Advertisement
Advertisement
Advertisement
Advertisement