Transformational Merger of HDFC Limited & HDFC Bank Limited

Mumbai: The Board of Directors of HDFC Limited and HDFC Bank Limited (HDFC Bank) at their respective meetings held on April 4, 2022, inter alia, approved a composite scheme of amalgamation (“Scheme”) for the amalgamation of

(i) HDFC Investments Limited and HDFC Holdings Limited, with and into HDFC Limited; and (ii) HDFC Limited with and into HDFC Bank, and their respective shareholders and creditors, under Sections 230 to 232 of the Companies Act, 2013 and other applicable laws including the rules and regulations (“Proposed Transaction”).

The Scheme and the Proposed Transaction is subject to customary closing conditions. The Scheme is subject to the receipt of requisite approvals from the Reserve Bank of India, Securities and Exchange Board of India, the Competition Commission of India (CCI), the National Housing Bank, the Insurance Regulatory and Development Authority of India, the Pension Fund Regulatory and Development Authority, the National Company Law Tribunal, BSE Limited, the National Stock Exchange of India Limited and other statutory and regulatory authorities, and the respective shareholders and creditors, under applicable law.

Upon the Scheme becoming effective, the subsidiaries/associates of HDFC Limited will become subsidiaries/associates of HDFC Bank. Shareholders of HDFC Limited as on the record date will receive 42 shares of HDFC Bank (each of face value of Re.1), for 25 shares held in HDFC Limited (each of face value of Rs.2), and the equity share(s) held by HDFC Limited in HDFC Bank will be extinguished as per the Scheme. As a result of this, upon the Scheme becoming effective, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC Limited will own 41% of HDFC Bank.

Strategic Rationale and Benefits

HDFC Ltd is India’s premier housing finance company and has unrivalled relationships, scale, and deep underwriting expertise in the housing sector, built over multiple decades and across economic cycles.

HDFC Bank, with more than 68 million customers, 6,342 branches, and a full suite of credit, liability, and distribution offerings is the leading private sector bank with deep relationships, insights, and understanding of its customers built over multiple decades.

The combined entity will bring together complementary strengths of the two organizations, enabling a rewarding customer relationship. Post the combination, HDFC Bank’s customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights throughout the customer life-cycle. This will result in an enhanced value proposition and customer experience for all customers of the combined entity.

The housing loan market is at the cusp of a strong up-cycle, with all-time high favorable industry dynamics, and provides a steady secured asset class with very attractive risk-adjusted returns. Over the last few years, regulatory developments and reforms including (i) higher regulatory standards for the Non-Banking Financial Companies (NBFCs) narrowing the gap with the Banking regulatory framework (ii) reduction in SLR rates (iii) deepening of affordable housing bond market and (iv) creation and deepening of Priority Sector Lending (“PSL”) Certificates market, have created a conducive environment for amalgamation of the two entities, leading to a “win-win” situation for all stakeholders.

The Boards of HDFC Ltd and HDFC Bank believe that the merger will create long-term value for all stakeholders, including customers, employees and shareholders of both entities. The amalgamation of the two entities will provide further impetus to the Government’s vision of “Housing for All”.

Speaking about the merger, Shri. Deepak Parekh, Chairman of HDFC Limited, said, “This is a merger of equals. We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, the infrastructure status to the housing sector, and government initiatives like affordable housing for all, amongst others. Over the last few years, various regulations for banks and NBFCs have been harmonised, thereby enabling the potential merger. Further, the resulting larger balance sheet would allow underwriting of large ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector, including credit to the agriculture sector.”

Speaking about the merger, Shri. Atanu Chakraborty, Chairman of HDFC Bank, said, “The product and market leadership of HDFC Limited in the housing finance business and the distribution and customer leadership of HDFC Bank enables the combined entity to offer a full suite of financial products to Indians at large and the proposed transaction is a big step in realizing the vision of housing for all as envisioned by our government.”

Speaking about the merger, Keki M. Mistry, Vice-Chairman, and CEO of HDFC Limited said “With the leadership that we have built-in housing finance and the deep understanding of the housing market across various economic cycles, this transaction helps in realizing the potential of what HDFC’s housing finance business can achieve by leveraging the distribution and customer base of HDFC Bank. It is a step in the right direction, taken at the right time, for value creation for all the stakeholders.”

Speaking about the merger, Sashi Jagdishan, CEO & MD, HDFC Bank said “The proposed transaction ticks all the right boxes in terms of completion of product offerings, product leadership in home loans as with other retail assets products, distribution strength across the country and a customer base that can be leveraged to cross-sell a complete suite of financial products. It is value accretive for all the stakeholders of both the organisations, including shareholders, employees, and customers.”