Lately, In the news we are hearing about a big merger of two companies from the same group of Companies. One is the largest private sector bank in India and one is among the top NBFCs in India. We are talking about the merger of HDFC Bank and HDFC.
In this episode of FinCon we are talking about effects and numbers from the mergers.
What is the whole story?
HDFC Ltd., a mortgage lender, and HDFC Bank, India’s largest private sector bank, announced a major merger on Monday. Here, are 3 points you need to know:
1.Why the merger?
The merger will create a financial giant that will be better able to meet expanding credit demand. The companies can cross-sell the products better under one-roof. The move will help them leverage their distribution across urban, semi-urban and rural geographies.
The deal is expected to close within the next 18 months, laying the groundwork for one of India’s largest financial transactions. The announcement of the merger resulted in a substantial increase in the two companies’ share values, which attained an Intraday high of over 14–19% in the particular trading day.
2.Let’s Discuss the Numbers
After this merger HDFC Bank will become the second largest company in India in terms of Market capitalization beating Tata Consultancy Services Limited. The Bank is already the second largest bank in India after State Bank of India. After the merger the Bank will become twice as big as ICICI Bank which is the 3rd largest bank in India.
HDFC Limited, India’s largest housing financing firm with Rs 5.26 trillion in AUM and a market capitalization of Rs 4.44 trillion, will merge with HDFC Bank, India’s largest private sector bank by assets with a market capitalization of Rs 8.35 trillion. Furthermore, the entity will be known as HDFC Bank Ltd.
3.What’s in it for Investors?
As, you should know that HDFC sells the loans to HDFC Bank to create various mortgage and other form of securities and because the process is complex right now, it will ease things up after merger.
Also, the Share swap ratio will be such that the Shareholders of HDFC Limited, as on record date, will receive 42 shares of HDFC Bank for 25 shares of HDFC Limited.
HDFC Limited shareholding in HDFC Bank will be extinguished and HDFC Bank will be 100 per cent owned by public shareholders. Existing shareholders of HDFC Limited will own 41% of HDFC Bank.
Although, the news had an positive impact on the shares of HDFC Group for few days. Now the Euphoria for Merger is going away day by day.
So, that’s it for this blog on FinCon by Omega Fianancial. Stay Tuned for more updates and Interesting concepts.
Omega Financial is a Mutual Fund Distributor and Financial Services company in Chhattisgarh. The company focuses on creating wealth for its customers through various types of Financial products and services, such as Mutual Funds, Retirement Planning, Portfolio Management, Stock Broking, Income Tax filling, and a large range of health and Life Insurances.
