Leading housing lender HDFC merges with HDFC Bank, shares soar

Upon entry into force of the merger plan, the subsidiaries or associates of HDFC will become subsidiaries or associates of HDFC Bank

New Delhi: Housing finance company Housing Development Finance Corporation (HDFC) said on Monday that its board had approved the merger of its wholly-owned subsidiaries HDFC Investments and HDFC Holdings with HDFC Bank.

As soon as the merger plan becomes effective, subsidiaries or associates of HDFC will become subsidiaries or associates of HDFC Bank, it said in a regulatory filing to the stock exchanges.

The proposed transaction aims to create a significant balance sheet and net worth that would allow a greater flow of credit into the economy.

It will also allow for larger loans to be taken out, including infrastructure loans, an urgent need of the country, the filing said.

The merger of HDFC, India’s largest housing finance company (HFC), with India’s largest private sector bank, HDFC Bank, will provide seamless housing lending and leverage the vast base more than 68 million HDFC Bank customers and, among other things, to improve the pace of credit growth, the filing adds.

“After the merger, HDFC Bank customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long-term mortgage relationship to offer varied credit and deposit products through better insights throughout the customer lifecycle,” it said.

The boards of directors of both entities believe that the merger will create long-term value for all stakeholders, including customers, employees and shareholders.

The merger of the two entities will give further impetus to the government’s vision of “housing for all”, he said.

HDFC Bank is present in over 3,000 cities/towns through its 6,342 branches, of which approximately 50% are in semi-urban/rural geographies of the country.

Leveraging this power of distribution, the proposed transaction would broaden the housing loan offering, synonymous with Pradhan Mantri Awas Yojana’s national goal of providing housing for all.

“This is a merger of equals. We believe that the housing finance industry is poised to grow by leaps and bounds due to the implementation of RERA, the state of infrastructure in the industry housing, government initiatives such as affordable housing for all, among others,” said Deepak Parekh, President of HDFC.

“Over the past few years, various regulations for banks and NBFCs have been harmonized, enabling the potential merger. In addition, the resulting larger balance sheet would allow for the underwriting of large infrastructure loans, accelerate the pace of growth credit in the economy, stimulate affordable housing and increase the amount of credit to the priority sector, including credit to the agricultural sector.”

Reacting to the merger announcement, shares of HDFC and HDFC Bank rose 14% and 11%, respectively, in the opening session.

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