HDFC housing finance to merge with HDFC Bank

The board of directors of HDFC have approved the merger of India’s largest housing finance firm Housing Development Finance Corporation (HDFC) with India’s largest private sector bank HDFC Bank.

Under the agreement, HDFC Bank will be 100% owned by public shareholders, and existing shareholders of HDFC Limited will own 41% of stake in HDFC Bank. The deal is expected to build the bank’s housing loan portfolio and enhance its existing customer base.

The merger will be a two-part merger in which HDFC Investments Limited and HDFC Holdings Limited will merge with HDFC Limited as a first step. The next step of the merger will be the merger of HDFC Limited with HDFC Bank.

The proposed deal is now subject to approval of regulatory bodies such as Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), the Competition Commission of India, and the National Housing Bank.

HDFC Chairman Deepak Parekh said harmonisation of rules between banks and non-banks which reduces the regulatory arbitrage was one of the key factors which influenced the decision for merger between the two companies.

Parekh said, “This is a merger of equals. We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, infrastructure status to the housing sector, government initiatives like affordable housing for all, amongst others. Over the last few years, various regulations for banks and NBFCs have been harmonised, thereby enabling the potential merger.”

He added that the amalgamation will take between 12-18 months and it will not impact employees of HDFC. The combined balance sheet of the merged entity will be Rs 17.87 lakh crore and the net worth will be Rs 3.3 lakh crore, Parekh said.