Mumbai: India’s largest housing finance company HDFC Ltd and leading private sector lender HDFC Bank on Monday announced a transformational merger to bring together complementary strengths of the two organizations, enabling a rewarding customer relationship.
The Board of Directors HDFC and HDFC Bank approved the composite scheme of amalgamation for the amalgamation of HDFC Investments Limited and HDFC Holdings Limited with HDFC Bank Limited.
HDFC will acquire 41 percent stake in HDFC Bank through the transformational merger, informed the HDFC Bank.
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 through-out the customer life-cycle. This will result in an enhanced value proposition and customer experience for all customers of the combined entity, the HDFC said in a statement.
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 higher regulatory standards for the Non-Banking Financial Companies (NBFCs) narrowing the gap with the Banking regulatory framework, reduction in SLR rates, deepening of affordable housing bond market and 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 statement added.
Speaking about the merger, Deepak Parekh, Chairman 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, infrastructure status to the housing sector, 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, Atanu Chakraborty, Chairman 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 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.”
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.”
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.”