HDFC-HDFC Bank merger to take place on July 1; HDFC to delist on July 13

In a major development, HDFC (Housing Development Finance Corporation) and HDFC Bank will merge on July 1, paving the way to the country's largest corporate merger. Following this, HDFC shares will delist on July 13 and amalgamate into HDFC Bank. 

"We will start selling mortgages, which we were not doing prior to this (the merger). So the reach across urban and semi-urban areas where HDFC Bank’s branches will start marketing and dispersing mortgage loans, so we expect the growth to increase as there has been a huge demand," Deepak Parekh, Chairman, HDFC Ltd told reporters in Mumbai.

According to Parekh, all regulatory approvals have been taken and the board of both entities will meet on June 30, after market hours to approve the merger.

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.

Over the past several months, both entities have been seeking regulatory approvals from SEBI (Securities and Exchange Board of India), RBI (Reserve Bank of India) and the bourses for a smooth transition of the merger.

In April, the BSE and National Stock Exchange (NSE) gave their in-principle approval for the transfer of non-convertible debentures (NCDs) from HDFC (Housing Development Finance Corporation) Ltd to HDFC Bank. The RBI also approved HDFC Bank or HDFC (Housing Development Finance Corporation) Limited to increase the shareholding to more than 50% in HDFC Life Insurance Company Limited and HDFC ERGO General Insurance Company Limited prior to the effective date of the merger. The apex bank has also permitted HDFC Bank to continue holding HDFC Limited’s stake in HDFC Education and Development Services Private Limited, which is engaged in operating three education schools for a period of two years from the effective date of the merger. In HDFC Credila Financial Services Limited, however, the HDFC Bank is required to bring down the shareholding to 10% within two years from the effective date of the merger and not to onboard new customers.

Last month, RBI gave approval to SBI Funds Management to acquire up to a 9.99% stake in merger-bound HDFC Bank Ltd.

Following the development, shares of HDFC and HDFC Bank were trading higher. While shares of HDFC closed 1.59% higher at ₹2,762.50, the share price of HDFC Bank was trading 1.38% higher at ₹1,658.