HDFC Bank & HDFC Ltd to Become 2nd Largest Indian Company Post-Merger

HDFC Bank is the largest private sector bank in India incorporated in August 1994 and was the first to obtain RBI approval to establish a bank in the private sector. Till date the company has 7821 branches across 3811 cities in India, serving over 83 million customers.

HDFC Ltd, India’s first specialized mortgage firm was established in October 1977. H T Parekh was the founder chairman of HDFC. It is a major housing finance provider in India. It also has strong presence in banking, life and general insurance, asset management, deposits, and education loans. HDFC Ltd. has so far provided financing for 10.2 million housing units.

Listing, Return and Performance

In March 1995, HDFC bank launched its IPO of Rs 500 million and was oversubscribed by 55 times. Within two months of this IPO issue, the bank’s shares were quoted at a 300% premium. It was listed on the BSE in May 1995 at Rs 39.95 and was listed on the NSE in November 1995.

In 1978 HDFC Ltd did a first Public issue of equity shares of Rs 100 million.

 Unlocking Value – Merger benefits

In the history of Indian Economy this merger will be considered as the biggest merger ever by creating a gigantic bank with a market capitalization of over 14 lakh crores. Post-merger the combined market capitalization will enable HDFC bank to become the second largest entity in India as per market capitalization after Reliance Industries.

This transformative merger is expected to result in various benefits for both the entity and their stakeholders. The synergies between both will enable them to leverage their collective resources, expand their product offerings, and penetrate new market segments. It will also get the benefit of wider distribution networks. Needless to say, cross-selling product can be done easily post-merger and will help to bring down the cost of funds.

Shareholders of HDFC ltd will receive 42 shares of HDFC bank for 25 shares of HDFC ltd – a ratio of 1:1.68. 

Conclusion:

This merger will result in an enhanced value proposition and customer experience for both the customers of the combined entity. This will change the game in the highly competitive financial services market. HDFC bank is the second largest bank in private sector in India is set to expand its net-worth even further and create greater competition in an already cut-throat market. Post-merger HDFC bank will be almost twice as big as ICICI Bank.

When compared to SBI, the largest public sector bank with a market capitalization of more than $5 trillion. After the merger, HDFC Bank will have a market capitalization of over 14 lakh crore, almost tripling its current size.