HDFC – HDFC Bank Merger Expected to Finalize on July 1, Deepak Parekh Confirms

The long-awaited merger between HDFC and HDFC Bank is on track to be effective from July 1, according to the announcement made by HDFC Chairman Deepak Parekh.

After receiving approvals from the necessary regulatory bodies, the boards of both institutions are scheduled to convene on June 30 for a crucial meeting that will pave the way for the merger. With the merger set to take effect, HDFC shares experienced a significant surge on Tuesday, reaching a 2.3% increase, marking the highest jump since early May.

Chairman Deepak Parekh further revealed that trading of HDFC securities will cease on July 13, while the merged entity is expected to commence trading on July 17.

Confirming the timeline, Parekh stated, “June 30 will be the last board meeting of HDFC.” The Reserve Bank of India had previously granted selective regulatory relief to HDFC Bank in April to facilitate a smoother merger process.

Termed as the largest transaction in India’s corporate history, the merger between HDFC Bank and the leading domestic mortgage lender was agreed upon on April 4 last year. The deal, valued at approximately $40 billion, created a financial services behemoth. The unprecedented merger is expected to have a profound impact on tens of millions of customers and shareholders across both companies, extending to the group insurance and asset management businesses.

The proposed merged entity will boast a combined asset base of around Rs 18 lakh. HDFC Bank has planned to allocate 42 new shares for every 25 shares of HDFC. To ensure a seamless transition, the mortgage lender aims to carefully time the record date, ensuring no gap occurs between the suspension of HDFC shares and the allocation of HDFC Bank shares to its over 740,000 shareholders.

Pankaj Pandey, the head of research at ICICI Securities, emphasized the significance of HDFC Bank in the banking space, stating, “HDFC Bank is systemically important and a major franchise. Thus, portfolio and fund managers wouldn’t risk ignoring it.” He further added that even after the merger, HDFC Bank presents a better investment opportunity with decent upside potential, trading at around 2.5 to 2.6 times its forward price to book and not fully capturing its market share gains and growth potential.