HDFC Ltd announces merger with HDFC Bank; stocks surge up to 10%—know share distribution arrangement

HDFC Restricted will merge into HDFC Financial institution, India’s largest non-public sector financial institution by belongings, as a part of transformational merger, learn a regulatory submitting by the 2 corporations on Monday.  

“We want to inform you that the Board of Administrators of Housing Improvement Finance Company Restricted (“Company”) at its assembly held right this moment i.e. April 4, 2022, has inter alia permitted a composite scheme of amalgamation (“Scheme”) for the amalgamation of: (i) HDFC Investments Restricted and HDFC Holdings Restricted, wholly-owned subsidiaries of the Company, with and into the Company and (ii) the Company with and into HDFC Financial institution Restricted (“HDFC Financial institution”),” mentioned HDFC Ltd in a regulatory submitting on Monday 

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As a part of the association, subsidiary/associates of HDFC Restricted will change into subsidiary/associates of HDFC Financial institution. HDFC Restricted shareholders will obtain 42 shares of HDFC Financial institution for 25 shares of HDFC Restricted as per the scheme of association.   

“HDFC and HDFC Financial institution have introduced merger within the ratio of 0.6:1 i.e. shareholders of HDFC Ltd will obtain 42 shares of the financial institution for each 25 shares of HDFC ltd. Values HDFC ltd at ~4% above Friday’s closing worth. It’ll entail issuance of 1877m shares by HDFC Financial institution (cancellation of HDFC stake within the financial institution) and a dilution of 25% for the financial institution on a post-issuance foundation,” mentioned JM Analysis.  

Complete mixed mortgage e book of Rs18.11tn with mortgages forming 27% of the mortgage combine, mentioned the analysis.   

“PSL compliance and CRR/slr will be sizeable drags on the bs of the financial institution,” it added 

In the meantime, publish the merger, HDFC Financial institution might be 100% owned by public shareholders and current shareholders of HDFC Restricted will personal 41% of HDFC Financial institution.  

Shares of HDFC Ltd and HDFC Financial institution rose as much as 10% after the merger information turned public. HDFC Financial institution hit 9% higher circuit to Rs 1656.90 a share and HDFC Restricted rose 10% to Rs 2745.30 per share on the BSE on transformational merger information.  

As per the Scheme, the appointed date for amalgamation of HDFC Investments Restricted and HDFC Holdings Restricted with and into the Company shall be the tip of the day instantly previous the efficient date of the Scheme. Additional, the appointed date for the amalgamation of the Company with and into HDFC Financial institution shall be the efficient date of the Scheme.