RBI gives green signal to HDFC, HDFC Bank merger proposal

HDFC Bank on Monday said it has got banking sector regulator RBI's nod for the merger proposal of its parent HDFC Ltd with itself.

Touted as the biggest transaction in India's corporate history, HDFC Bank on April 4 agreed to take over the biggest domestic mortgage lender in a deal valued at about USD 40 billion, creating a financial services titan.

"HDFC Bank has received a letter dated July 04, 2022 from the Reserve Bank of India (RBI) whereby the RBI has accorded it's 'no objection' for the Scheme, subject to certain conditions as mentioned therein," the bank said in a regulatory filing.

The merger proposal remains subject to various statutory and regulatory approvals, including from the Competition Commission of India (CCI), National Company Law Tribunal (NCLT), other applicable authorities and the respective shareholders and creditors of the companies, it said.

Earlier this week, the proposed merger got approval from both stock exchanges -- BSE and NSE.

The proposed entity will have a combined asset base of around Rs 18 lakh crore. The merger is expected to be completed by the second or third quarter of FY24, subject to regulatory approvals.

Once the deal is effective, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC will own 41 per cent of the bank.

Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares held.

The observation letter by the BSE said the company is advised to disclose the details of all the actions taken by Sebi or any other regulator against any of the entities, its directors/promoters and promoter group, in the petition to be filed before NCLT.

The company shall ensure that no changes to the draft scheme except those mandated by the regulators or tribunals should be made without specific written consent of Sebi, it said.

The amalgamated company is advised that the proposed equity shares issued in terms of the scheme should mandatorily be in dematerialised form only, it said.

Following the merger, the combined balance sheet will be Rs 17.87 lakh crore and the net worth will be Rs 3.3 lakh crore, as of the December 2021 balance sheet.

As of April 1, 2022, the market capitalisation of HDFC Bank was Rs 8.36 lakh crore (USD 110 billion) and that of HDFC Rs 4.46 lakh crore (USD 59 billion).

Post-merger HDFC Bank will be twice the size of ICICI Bank, which is the third-largest lender now.