Today, Mortgage lender HDFC has announced that it will merge with HDFC bank with a share merger ratio of 42 shares of HDFC bank to 25 shares of HDFC. The proposed transaction will allow HDFC bank to build its housing loan portfolio and reinforce its existing customer base. HDFC will hold 41% of transactions in the bank after this proposed merger. The merger is reliant on regulatory sanctions from the Reserve Bank of India and other regulatory authorities.
HDFC has total assets of Rs 6.23 lakh crore while HDFC Bank has assets worth Rs 19.38 lakh crore. The proposed transaction will aid leverage and form resolution for several stakeholders, according to an exchange filing. It may also take an advantage of increased scale, comprehensive product offering, balance sheet resiliency, and the capability to drive synergies across revenue choices, operating efficiencies, and underwriting efficiencies.
For growing the long tenor loan book, HDFC Bank has a large customer base of 6.8 crores and a well-assorted low-cost funding base. The bank would thrive from a larger balance sheet and net worth which would permit underwriting of larger ticket loans and also access to a greater flow of credit into the Indian economy. In a regulatory filing, HDFC said that an alliance of the corporation and HDFC Bank is wholly supportive to, and emphasizes the value proposition of HDFC Bank.