HDFC-HDFC Bank merger: HDFC AMC gets SEBI's nod for change in control

HDFC Asset Management Company on Wednesday said it has received approval from the market regulator SEBI (Securities and Exchange Board of India) for a change in control of the company, thus paving the way for the merger between HDFC and HDFC Bank.

"We wish to inform you that pursuant to the Company’s application under the SEBI (Portfolio Managers) Regulations, 2020 ("PMS Regulations"), SEBI has granted its final approval for change in control of the Company, on account of the amalgamation of Housing Development Finance Corporation Limited with and into HDFC Bank Limited; subject to compliance with the applicable provisions of PMS Regulations, circulars thereto," the company said in a stock exchange filing. Both HDFC (Housing Development Finance Corporation and HDFC Bank expect the merger to be completed in July this year.

In April last year, HDFC Bank, the country’s largest private sector lender, and HDFC, India’s largest housing finance corporation, announced their merger to create long-term value for all stakeholders, including customers, employees, and shareholders of both entities. The proposed transaction is to create a large balance sheet and net worth that would allow a greater flow of credit into the economy. Post the amalgamation, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.

Last week, the Reserve Bank of India (RBI) had given approval to SBI Funds Management to acquire up to 9.99% stake in merger-bound HDFC Bank Ltd in a period of six months i.e. by November 15, 2023. The RBI also asked SBIFML to ensure the aggregate holding in the Bank remains below 10% of the paid-up share capital or voting rights of the bank at all times.

Earlier, the stock exchanges BSE and National Stock Exchange (NSE) had given in-principle approval for the transfer of non-convertible debentures (NCDs) from HDFC Ltd to HDFC Bank, which was done to smoothen the merger process that's aimed to conclude in July 2023.

The proposed amalgamation now needs the final approval from the Securities and Exchange Board of India (SEBI), which will pave the way for the largest merger in the country’s corporate history.

The RBI in April 2023 had also approved HDFC Bank or HDFC (Housing Development Finance Corporation) Ltd's request to increase the shareholding to over 50% in HDFC Life Insurance Company Ltd and HDFC ERGO General Insurance Company Ltd post-merger.

Ahead of the development, shares of HDFC Asset Management Company (AMC) closed 1.36% lower at ₹1,742.90. During the session, the company’s market capitalisation stood at ₹37,200 crore with 23,080 shares exchanging hands on the BSE.

In March this year, SBI Mutual Fund acquired a 2.2% equity stake in HDFCAMC by purchasing 47.33 lakh shares of HDFC AMC at an average price of ₹1,600 apiece, taking the aggregate value at ₹757.40 crore.

In the March quarter, HDFC AMC, which is a subsidiary of HDFC and the asset management company of HDFC Mutual Fund, reported a 9.5% growth in its profit after tax (PAT) at ₹376.1 crore as compared to ₹343.5 crore in the same period last year. The revenue from operations rose 5% year-on-year to ₹540.9 crore in Q4 FY23, while total income climbed 10% YoY to ₹637.8 crore, aided by 50% growth in other income to ₹96.9 crore.