HDFC Bank shares closed 1.51% higher at ₹1,701.75 apiece on BSE on Friday.
On Monday, HDFC Bank shares experienced a gain of over 2% and reached a new 52-week high. This surge was attributed to the merger between HDFC Bank and Housing Development Finance Corporation (HDFC), which officially took effect on July 1, following the necessary approvals. As a result of this merger, HDFC Bank has become the largest private lender in India, currently ranking fourth in terms of equity market capitalisation. The shares of HDFC Bank opened at ₹1714.90 apiece on the BSE.
Closing at ₹1,701.75 apiece on Friday, HDFC Bank shares registered a 1.51% increase. Market analysts predict that the corporate action and the subsequent strong gap up opening have propelled the stock prices above their multi-month high. The bias remains positive, with expectations of the prices extending towards 1,850 and 1,670 as immediate support levels.
While the share exchange between the owners of HDFC Bank and HDFC Ltd. is scheduled for July 13, 2023, it should be noted that the merger was officially effective from July 1. Consequently, the trading window for HDFC Ltd. will be closed from the following Monday until July 13.
According to an exchange filing made on Saturday, HDFC Bank announced the successful completion of the merger with HDFC Ltd., having obtained all necessary shareholder and regulatory clearances. The merger was initially announced on April 4, 2022, with an estimated completion timeframe of 15-18 months, subject to obtaining the required permits and approvals.
The merged entity aims to leverage the significant complementarities between both organizations, creating substantial value for various stakeholders, including customers, employees, and shareholders. The increased scale, comprehensive product offering, balance sheet resiliency, and synergistic opportunities across revenue, operating efficiencies, and underwriting efficiencies are expected to drive this value, as mentioned in the bank’s exchange filing.
In accordance with the merger scheme’s share exchange ratio, HDFC Bank will issue and allot 42 new equity shares of face value Re 1 each, fully paid-up, to eligible shareholders for every 25 equity shares of face value ₹2 each, fully paid-up, held in HDFC Ltd. 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, highlighting it as a significant milestone in their journey. He expressed confidence in the combined strength of the two entities, envisioning a holistic ecosystem of financial services. Jagdishan emphasized agility, adaptability, and a relentless pursuit of excellence, promising to embrace challenges as opportunities and strive for success and integrity in the financial services industry.
Following the merger, HDFC Bank no longer has an identified promoter and has transformed into a financial services conglomerate offering a comprehensive range of services, including banking, insurance, and mutual funds through its subsidiaries. Previously, the bank acted as a distributor for these products.
The merger of HDFC Ltd., India’s largest Housing Finance Company, with HDFC Bank brings together the trusted home loan brand with an institution that enjoys a lower cost of funds. This combination is expected to facilitate a greater flow of credit into the economy, allowing for the underwriting of larger ticket loans, including infrastructure loans, and contributing to nation-building and employment generation.
All employees of HDFC Ltd. as of the effective date have become employees of HDFC Bank. Over the past few months, the bank has been diligently preparing for a seamless integration of systems, processes, and other aspects to ensure a welcoming work environment for the employees from HDFC Ltd.
Post-merger, the key subsidiaries of HDFC Bank include HDFC Securities Ltd., HDB Financial Services Ltd.