HDFC Bank and HDFC Merger: All you need to know

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HDFC Bank - HDFC Merger

I. Introduction

HDFC Bank and HDFC are two major players in the Indian banking and financial services sector. HDFC Bank, founded in 1994, is one of the largest private sector banks in India, known for its extensive range of banking products and services. HDFC, established over four decades ago, is a leading housing finance company that provides loans and financial solutions for homebuyers. The recent announcement of their decision to merge has significant implications for various stakeholders. In this blog post, we will delve into the details of this merger and explore its impact on customers, employees, the market, and investors.

Key Operations of the Entities: 

Retail BankingIndividual Loans
Corporate BankingCorporate loans
Investing BankingLease Rental Discounting
WholesaleConstruction Finance loan

Key Statistics of the Entities: 

HDFC Bank (as on March 2023)HDFC (as on March 2023)
Deposits = 1,883,395 croreDeposits = Rs 1,51,941.07 crores
Loans =1,600,586 croreLoans = Rs 6,24,551.54 crores
Credit card = 17535910 cards 

The Merger Timeline:

April 4, 2022HDFC Bank and HDFC announce their merger in a share swap deal.
May 17, 2022The Reserve Bank of India (RBI) grants in-principle approval for the merger
November 25, 2022HDFC and HDFC Bank hold shareholder meetings to seek approval for the merger.
May 18, 2023HDFC Bank Ltd.'s stock price rose by 6% on its first day of trading on the stock exchanges post the announcement.
June 20, 2023HDFC Bank Ltd. announces that it has crossed the 100 million customer mark
June 27, 2023HDFC Bank Ltd. is ranked as the world's 5th largest bank by assets by S&P Global.
July 01,2023Share will come into effect.
July 13,2023HDFC Share will be delisted from Stock exchange.
July 13,2023For every 25 shares of HDFC , shareholders will get 42 shares of HDFC bank.

II. Why the Merger?

HDFC Bank and HDFC are merging to create a stronger financial entity by leveraging their strengths. The goal is to better serve customer needs and adapt to industry changes. The merger combines HDFC Bank's banking infrastructure with HDFC's housing finance customer base, leading to synergistic benefits for both.

Quick Note: What is a SWAP ratio? 
Answer: Swap ratio is the number of shares of the acquiring company that will be exchanged for each share of the target company in a merger.

The Swap: Share Exchange Details
Now, in context to the merger, the Swap Ratio is: For every 25 shares of HDFC Limited, shareholders will get 42 shares of HDFC bank. 

III.  Access to 25 million HDFC group customers  - What Does This Mean for Customers?

The integration of banking services with housing finance solutions is likely to lead to the development of innovative products and offerings tailored to the needs of homebuyers. This could include customized loan packages, competitive interest rates, and streamlined processes for home loan applicants.

Furthermore, customers may benefit from an expanded branch network and an improved digital banking experience. The combined resources of HDFC Bank and HDFC could result in increased accessibility to banking services, enhanced customer support, and an extended range of financial products and services to choose from.

Notably, close to 70% of the customers of HDFC do not have an account with HDFC Bank. Conversely, only 2% of the customers of HDFC Bank owned a product of HDFC. This allows the merged entity massive scope for cross selling their products and services, enabling it to flourish.

IV. What Does This Mean for Employees?

Employees of HDFC Bank and HDFC can expect certain changes as a result of the merger. While the specific details are yet to be determined, organizational restructuring and realignment of roles and responsibilities are likely to occur. There may be opportunities for cross-functional collaboration, skill development, and career growth within the merged entity. It is important to note that any organizational changes resulting from the merger will prioritize the best interests of employees, aiming to create a harmonious and productive work environment.

V. What Does This Mean for the Market?

The merger of HDFC Bank and HDFC is poised to have a substantial impact on the Indian banking industry. The combined entity will possess a broader product portfolio and an enhanced market presence, potentially intensifying competition within the sector. This development may prompt other banks and financial institutions to reassess their strategies and explore similar mergers or partnerships to maintain competitiveness.

Furthermore, the merger could initiate a trend of consolidation in the banking industry, with larger entities assuming a dominant position. This consolidation may contribute to improved stability and resilience of the sector, fostering an environment conducive to sustainable growth and development.

VI. What Does This Mean for Investors and Shareholders?

At least 60 equity mutual fund schemes will see their combined exposure to HDFC Bank and HDFC overshoot the 10% cap, Reuters reported on 15 June. 

As per the rules of the Securities and Exchange Board of India (SEBI), a mutual fund scheme cannot invest more than 10% in a single security. However, exchange-traded funds and funds that invest in particular sectors are exempt.

Short Term ImpactLong Term Impact
Stock prices of both companies may be affectedMerger offers Growth prospects and Stronger market position for the merged entity
Investors may reassess their investment decisionsIncreased operational efficiency and improved financial capabilities
Fluctuations in stock prices influenced by market sentiments and investor confidencePotential for enhanced profitability and shareholder value over time
Shareholders Benefit:
Existing shareholders of HDFC ltd will own 41% of HDFC bank
Increase in scale and reach of business
Lower cost of funds for mortgage business
Enhanced product and service offering

In conclusion, the merger of HDFC Bank and HDFC represents a significant development in the Indian banking and financial services industry. Customers, employees, market participants, and investors should stay informed about the specific details and implications of the merger. By understanding the potential impacts, stakeholders can navigate this transition effectively and make well-informed decisions to ensure their financial well-being in the evolving banking industry.

VII. Share price performance

Since the announcement of the merger, both HDFC and HDFC Bank’s share prices have been on an upward trend. Let’s see how they fared.


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(as on 30th June, 2023)

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.