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Dolat Capital Report
The board of Housing Development Finance Corporation Ltd. and HDFC Bank Ltd. today approved the merger of the housing finance company with HDFC Bank.
Post amalgamation, HDFC's current shareholders will own ~41% of the Bank and HFC's subsidiaries/associate companies will come under the fold of HDFC Bank.
The amalgamation, subject to regulatory approvals, will result in total loan book of ~Rs 18 trillion, materially narrowing the gap in market share with the largest lender State Bank of India (at Rs 27 trillion).
The merger is expected to be consummated by Q2/Q3 of FY24.
Our back of envelope calculations allude to limited impact from higher statutory liquidity ratio/ cash reserve ratio requirements given the excess liquidity buffers with both entities, while impact from purchase of priority sector lending certificates to meet priority sectors lending requirements on profit and loss should be around ~6%, excluding of any synergies.
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