HDFC Bank shares jumped as much as 10%, while HDFC Ltd surged 13% while equity indices Sensex and Nifty rallied over 2.5% in the morning trade, as HDFC Ltd, Indias largest housing finance lender, announced that it would be merging with its subsidiary, HDFC Bank, the largest private sector bank in the country.
‘After 45 years in housing finance, after providing 9 million homes to Indians, we have to find a home for ourselves, and we have found a home in our own family company HDFC Bank,’ Deepak Parekh, Chairman of HDFC Ltd said on Monday at the press conference following the announcement of the merger, which will create a financial services conglomerate, beating the m-cap of even TCS, to be one of the country’s largest corporations.
The deal is subject to approval from various regulatory and statutory authorities including the RBI, SEBI and the Competition Commission.
‘We are positive we will get approval because it is positive for the economy, you need large banks in India. RBI is encouraging NBFCs (Non banking financial companies) to become banks. And for the NBFCs also, the (regulatory) arbitrage which was available in the past is also narrowing, so theres limited advantage for the NBFCs, as regulations similar to banking regulations are coming for the NBCFs,’ he added.
On being asked about management changes post the deal, Parekh said the deal will take about 15 to 18 months to complete.
Parekh said the company was working on the deal for the last three weeks. The board of the two companies approved the merger earlier on Monday and the announcement came about 15 minutes before the markets opened. Shares of both entities jumped 10 per cent in early trading. HDFC Bank shares were up as much as 14% while HDFC Ltd shares rose as high as 19.6% in intraday trading.
The merger will lead to better synergies and returns for the shareholders, HDFC Chairman Deepak Parekh said at the press conference, adding that the merger will help enhance the market share of the bank, mitigate single product risk, and diversify its offerings.