HDFC Bank gets RBI nod for HDFC merger

The private lender on Monday (4 July 2022) said it has received banking sector regulator Reserve bank of India (RBI)'s approval for the proposed amalgamation of HDFC into HDFC Bank.

"HDFC Bank has received a letter dated July 04, 2022 from the Reserve Bank of India (RBI) whereby the RBI has accorded it's 'no objection' for the Scheme, subject to certain conditions as mentioned therein," the bank said in a regulatory filing. The scheme remains subject to various statutory and regulatory approvals, including from the Competition Commission of India (CCI), National Company Law Tribunal (NCLT), other applicable authorities and the respective shareholders and creditors of the companies, it said.

On 2 July 2022, the proposed merger got approval from both stock exchanges BSE and NSE.

The board of Housing Development Finance Corporation (HDFC) on 4th April 2022 approved a composite scheme of amalgamation of HDFC into HDFC Bank, and their respective shareholders and creditors. The subsidiaries and associates of HDFC will shift to HDFC Bank.

Shareholders of HDFC as on the record date will receive 42 shares of HDFC Bank (each of face value of Re 1), for 25 shares held in HDFC (each of face value of Rs 2), and the equity share(s) held by HDFC in HDFC Bank will be extinguished as per the Scheme.

As a result of this, upon the Scheme becoming effective, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.

As of 31 December 2021, HDFC Bank's total advances stood at Rs 12,68,863 crore and HDFC's total advances stood at Rs 5,25,806 crore.

Post merger, pro forma total advances of the combined entity is expected to be Rs 17,86,669 crore.

The proposed transaction will result in reducing HDFC Bank's proportion of exposure to unsecured loans. The merger is expected to result in bolstering the capital base and bringing in resiliency in the balance sheet of HDFC Bank.

Post the combination, HDFC Bank's customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights through-out the customer life-cycle. This will result in an enhanced value proposition and customer experience for all customers of the combined entity.

The boards of HDFC and HDFC Bank believe that the merger will create long-term value for all stakeholders, including customers, employees and shareholders of both entities. The amalgamation of the two entities will provide further impetus to the Government's vision of "Housing for All".

The merger is expected to close within 18 months (Q2 / Q3 FY24), subject to completion of regulatory approvals and other customary closing conditions.

HDFC Bank is private sector lender. As of 31 March 2022, its distribution network was at 6,342 branches and 18,130 ATMs / Cash Deposit & Withdrawal Machines (CDMs) across 3,188 cities / towns as against 5,608 branches and 16,087 ATMs I CDMs across 2,902 cities/ towns as of 31 March 2021.

HDFC Bank's net profit rose 22.83% to Rs 10,055.18 crore on 8.07% increase in total income to Rs 41,085.78 crore in Q4 FY22 over Q4 FY21.

HDFC provides home loans for affordable housing and continues to have the largest number of home loan customers at over 270,000 who have availed benefits under the government's Credit Linked Subsidy Scheme.

HDFC's standalone net profit rose 16.37% to Rs 3700.32 crore on 5.13% increase in total income to Rs 12308.46 crore in Q4 March 2022 over Q4 March 2021.

Shares of HDFC Bank rose 0.13% to Rs 1355.40 while shares of HDFC rose 0.22% to Rs 2215.50 on Monday, 4 July 2022.

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