One of the biggest mergers in corporate India is likely to become effective from next month, with the boards of HDFC Bank and HDFC Ltd meeting on June 30 to give their final approval to the deal.
“Almost all the approvals are in place, and we hope to complete the merger process effective July 1. The boards of HDFC and the bank are meeting separately on June 30 after office hours to clear and approve the merger, which will be effective July 1,” HDFC chairman Deepak Parekh,flanked by his deputy Keki Mistry, told reporters.
Mistry, the HDFC vice-chairman and CEO, said the delisting of HDFC’s shares on the bourses will be effective from July 13, and the merged entity will start trading by July 17. If both the boards give the go-ahead to the proposal on June 30, it will be the last board meeting of HDFC which was founded in 1977 by H.T. Parekh. (Deepak Parekh’s uncle).
After leading the mortgage lender for more than four decades, Deepak Parekh will step down after the merger takes effect. However, in a clarification to the stock exchanges, HDFC said the merger date (July 1) and the delisting date (July 13) were tentative. The shareholders of HDFC eligible for HDFC Bank shares will be known on July 13.
It said that while the two companies are working towards finishing all the necessary formalities, the “dates are tentative and are subject to completion of certain formalities including those which are beyond the control of HDFC Ltd or HDFC Bank’’.
“Once the board of directors of HDFC Ltd and HDFC Bank decide on the effective date of the scheme as well as the record date, the same would be intimated to stock exchanges by applicable regulations,’’ the corporation added.
Both the HDFC entities have secured all the crucial approvals for the amalgamation which will create an entity with an asset base of Rs 18 lakh crore.
They have received approvals from various regulators that include the stock exchanges, the Reserve Bank of India, the Securities and Exchange Board of India, the Competition Commission of India and the National Company Law Tribunal (NCLT). The Mumbai bench of the tribunal through its order on March 17, 2023, had sanctioned the scheme.
HDFC Bank on April 4 last year agreed to take over HDFC, the country’s biggest mortgage lender. Once the deal is effective, HDFC Bank will be 100 per cent owned by public shareholders.
Existing shareholders of HDFC will own 41 per cent of the bank; every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares held by them. According to a Goldman Sachs note, the merged entity will be the 10th largest bank in the world and it will have an estimated market cap of $145 billion.
The brokerage said it sees no requirement for the bank to raise capital at least for the next eight years given lower capital consumption on the back of “improved risk density as well as improving ROEs with strong asset quality metrics’’.
Stocks rally
News of the merger led to a rally in the two HDFC and banking shares, hoisting the Sensex 446 points after three days of closing in the red.
While the HDFC stock finished at Rs 2,762.50, marking a rise of 43.15 or 1.59 per cent, HDFC Bank rose 1.38 per cent to settle at Rs 1,658 on the BSE.
Other banking and finance stocks also witnessed investor interest: SBI, Axis Bank, Kotak Bank, ICICI Bank and IndusInd Bank finished in the green among the Sensex pack.
“The domestic market rallied, primarily supported by banking and finance stocks, which received a boost from the merger updates from HDFC,” Vinod Nair, head of research at Geojit Financial Services, said.
A note from Nuvama Research said the HDFC Bank scrip could see an inflow of $29 million following the quarterly rebalancing of NSE’s indices on June 28.
