The merger between HDFC Bank and Housing Development Finance Corporation (HDFC) has generated significant attention in the financial market. The announcement of the merger, which came into effect on July 1, resulted in a surge of over 2% in HDFC Bank shares, pushing the stock to a new 52-week high. In this article, we will delve into the details of the merger, its implications, and the future prospects of HDFC Bank.
Introduction to the Merger
The merger between HDFC Bank and HDFC Ltd. represents a significant achievement in the Indian financial industry. HDFC Bank, already the largest private lender in the country, has now further strengthened its position through this merger. The equity market capitalization of HDFC Bank currently places it in the fourth position among Indian banks.
Following the merger, HDFC Bank shares experienced a positive price movement. The stock opened at ₹1714.90 apiece on the Bombay Stock Exchange (BSE) and closed 1.51% higher at ₹1,701.75 apiece on Friday. Analysts have observed a strong gap up opening in the stock price post the corporate action, with prices surpassing their previous high. The bias remains positive, and there are expectations of further upward movement towards ₹1,850 and ₹1,670 as immediate support levels.
Merger Timeline and Trading Window Closure
Although the actual share exchange is scheduled for July 13, 2023, HDFC Bank has clarified that the merger became effective on July 1. As a result, the trading window for HDFC Ltd. will be closed during the period from July 1 to July 13, 2023.
Successful Completion of the Merger
HDFC Bank officially reported the successful completion of the merger in an exchange filing on Saturday. All necessary shareholder and regulatory clearances have been obtained, leading to the integration of HDFC Ltd. into HDFC Bank. The decision to merge was announced on April 4, 2022, with a projected timeline of 15 to 18 months for completion.
Value Creation and Benefits of the Merger
The combined organization comprising HDFC Bank and HDFC Ltd. brings together a range of complementary strengths, poised to create value for various stakeholders. This includes customers, employees, and shareholders of both entities. The merger will lead to increased scale, a comprehensive product offering, enhanced balance sheet resiliency, and the ability to drive synergies across revenue opportunities, operating efficiencies, and underwriting efficiencies.
Share Exchange Ratio
According to the merger scheme, HDFC Bank will issue and allocate 42 new equity shares with a face value of Re 1 each, fully paid-up, for every 25 shares equity shares of the face value of ₹2 each fully paid-up held by eligible shareholders in HDFC Ltd. This share exchange ratio will be effective as of the record date, which is July 13, 2023.
Sashi Jagdishan, CEO & MD of HDFC Bank, expressed his satisfaction with the completion of the merger and highlighted the significance of this event. He believes that the combined strength of HDFC Bank and HDFC Ltd. will enable the creation of a holistic ecosystem of financial services. He emphasized the importance of agility, adaptability, and a relentless pursuit of excellence as the bank navigates the future. The CEO expressed confidence in overcoming challenges, learning from experiences, and setting the.