HDFC Bank, HDFC Ltd announce merger of equals

India's largest private lender HDFC bank will merge with the country's largest housing finance company, Housing Development Finance Corporation or HDFC Ltd to create a financial services conglomerate. HDFC Chairman Deepak Parekh on Monday said that the merger of mortgage firm HDFC with HDFC Bank will not only strengthen the entity against its competitors but also make its offerings more competitive. Addressing a press conference he added that post the merger, HDFC Bank will no longer have any promoters and that all the shares will be with the public. Parekh further informed that the move will also benefit the lower cost of funds to be available to the mortgage business.

Under the proposed deal, shareholders of HDFC Ltd will receive 42 shares of the bank for 25 shares held. The companies expect the deal - subject to regulatory approvals - to be completed in the second or third quarter of the financial year starting in April 2023. Parekh further said that “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”. 

There will be a combined customer base of HDFC Bank and HDFC Ltd with a plethora of financial products - mortgages, savings accounts, life insurance, general insurance, health insurance, investment products, credit cards, and personal loans. HDFC Bank has a presence in more than 3,000 cities or towns through its 6,342 branches, with about 50 per cent of these branches in semi-urban or rural areas in the country. HDFC Limited is a significant provider of home loans to the Low Income Group (LIG) and Middle Income Group (MIG) segments under the affordable housing initiatives of the Government of India. Access to housing finance for this category would be improved further on account of low-cost funds available by HDFC Bank.