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Nirmal Bang Report
HDFC Bank Ltd. and Housing Development Finance Corporation Ltd. have announced a scheme of amalgamation, whereby HDFC will be merged into HDFC Bank.
HDFC's shareholders will receive 42 shares of HDFC Bank for every 25 equity shares held in HDFC. Merger closure is expected within 18 months.
HDFC's existing shareholding in HDFC Bank will extinguish and existing shareholders (of HDFC) will own 41% in the new bank. The new bank will be 100% owned by public shareholders.
The announced merger had long been anticipated by investors on both the sides. Cost of regulatory compliance remains a key concern.
The underlying rationale for this merger is to create a strong bank with a formidable position in the mortgage segment, which complements HDFC Bank's existing presence in retail assets (ex-mortgage).
The biggest benefit to HDFC will be by way of lower cost of funds, leading to a more competitive positioning in the mortgage segment.
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