HDFC to merge two subsidiaries with bank in landmark deal

HDFC to merge two subsidiaries with bank in landmark deal

A merger between two subsidiaries of HDFC by way of an all-stock amalgamation is set to go ahead with the deal expected to be completed in 18 months subject to regulatory approval.

The boards of HDFC and HDFC Bank gave approval on 4 April for what is seen as one of the largest mergers in India’s banking industry. HDFC Holdings and HDFC Investments are set to merge with HDFC Bank.

The deal will see the bank wholly owned by public shareholders with existing HDFC shareholders having a 41% stake once the deal is completed. HDFC, promoter of HDFC Bank together with its two subsidiaries, currently hold 21% of the bank’s share capital.

Legal advisers to HDFC on the deal are AZB & Partners, Argus Partners and Singhi & Co. Wadia Ghandy & Co, and Cravath Swaine & Moore are advising HDFC Bank.

HDFC Bank’s market capitalisation stood at INR8.36 trillion (USD110 billion) as of April 1, with HDFC ’s at INR4.46 trillion (USD59 billion). Shareholders of HDFC will receive 42 shares in HDFC Bank for every 25 shares held.

The AZB team is led by managing partner Zia Mody, partners Ashwath Rau, Vipul Jain and Aditya Alok, with senior associate Himanshoo Tembe.

Managing partner Krishnava Dutt leads the Argus team along with partners Adity Chaudhury and Aastha. They were assisted on diligence by partners Prashanth Sabeshan, Rachika A Sahay, Vinod Joseph and their teams.

Partners Ashish Ahuja and Gopal Bankar lead the Wadia Ghandy team.

HDFC provides home loans to lower- and middle-income groups under the government’s affordable housing initiatives. Access to housing finance for this category would be improved due to low-cost funds available from HDFC Bank.

The bank, with a customer base of over 68 million, has a presence in more than 3,000 cities and towns through its 6,342 branches with about half located in semi-urban or rural pockets of the country. The bank also has 17,000 ATM outlets.