9:10 AM IST, 04 Apr 202210:03 AM IST, 04 Apr 20229:10 AM IST, 04 Apr 202210:03 AM IST, 04 Apr 2022
Housing Development Finance Corp. Ltd. and HDFC Bank Ltd. are set to merge in a deal which has been long speculated upon.
According to an exchange release, the merger will be a two-step process:
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Step 1: HDFC Investments Ltd. and HDFC Holdings Ltd., wholly owned subsidiaries of HDFC Ltd., will be merged with and into HDFC Ltd.
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Step 2: HDFC Ltd. will be merged with and into HDFC Bank Ltd.
The swap ratio agreed upon is:
HDFC Ltd currently owns about 21% of the bank. The management of HDFC Bank will continue to run the combined entity and Sashidhar Jagadishan will remain the chief executive.
Post the amalgamation, the entity will have a foreign shareholding of 65%.
The Entities Being Merged
The entities being merged are as follows:
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HDFC Ltd with total assets of Rs 6.23 lakh crore, turnover of Rs 35,681 crore and net worth of Rs 1.15 lakh crore as on December 31, 2021
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HDFC Bank with total assets Rs 19.38 lakh crore, turnover of Rs 1.16 lakh crore (includes other income) and net worth of Rs 2.23 lakh crore, as on December 31, 2021.
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HDFC Investments Ltd has total assets of Rs 341.37 crore, turnover Rs 200.11 crore and net worth of Rs 292.41 crore as on December 31, 2021.
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HDFC Holdings Ltd has total assets of Rs 244.43 crore turnover Rs 20.88 crore and net worth of Rs 241.80 crore as on December 31, 2021.
According to Keki Mistry, vice chairman of HDFC Ltd, the timing was right for the merger given that regulations for banks and housing finance companies have been harmonised to a large extent.
Meeting Regulatory Requirements
Keki Mistry, vice chairman of HDFC Ltd. said that a request has been made to the regulator to allow the combined entity to meet regulatory requirements in a phased manner.
The combined entity will need to meet the cash reserve ratio and statutory liquidity ratio required for banks.
The bank has been carrying significant amounts of liquidity, said Jagdishan when questioned about the amount of funds that would need to be raised to meet those requirements.
Merger Of Equals: Deepak Parekh
This is a merger of equals, said Deepak Parekh, chairman of HDFC Ltd. “Over the last few years, various regulations for banks and NBFCs have been harmonised, thereby enabling the potential merger,” he said.
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.
Deepak Parekh, Chairman, HDFC Ltd.
This is breaking news. The story will be updated.
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