The mega merger of HDFC Limited, the country’s largest housing finance company, with HDFC Bank, the country’s largest private sector bank by balance sheet size, moved a step closer towards final closure with the Competition Commission of India (CCI) giving its approval for the transaction.
“Commission approves proposed combination involving amalgamation of HDFC Limited, HDFC Bank, HDFC Investments and HDFC Holdings,” the CCI said in a tweet on Saturday.
It maybe recalled that the Boards of HDFC and HDFC Bank had on April 4 approved a scheme of amalgamation, which was billed as the biggest merger and amalgamation transaction in India’s corporate history.
Post the merger, the combined balance sheet will be ₹ 17.87 lakh crore and the net worth of the combined entity will be ₹3.3 lakh crore as of December 2021.
As of April 1, 2022, the market capitalisation of HDFC Bank was ₹8.36 lakh crore ($110 billion) and that of HDFC was ₹4.46 lakh crore ($ 59 billion).
Once completed, the amalgamation will create India’s biggest financial behemoth by market capitalisation. The merger is expected to be completed by the second or third quarter of FY24.
Post the completion of deal with all regulatory approvals, HDFC Bank will be 100 percent owned by public shareholders and existing shareholders of HDFC will own 41 per cent of the bank. HDFC shareholders will get 42 shares of HDFC Bank for every 25 shares held.
The proposed merger envisages a two-step amalgamation process—amalgamation of HDFC Investments and HDFC Holdings into and with HDFC Limited, such that HDFC Limited will be the surviving entity post this step. Then as part of the second step, the amalgamation of the amalgamated HDFC Limited into HDFC Bank will take place, such that HDFC Bank will be the surviving entity post this step.
The proposal has already received the approval of two stock exchanges (NSE and BSE) and the pension regulator PFRDA.
The Reserve Bank of India (RBI) has also in principle agreed to the merger, although the final approval is awaited. All eyes now are on the central bank to see how it would treat the equity holding of the combined entity in the insurance arms of HDFC Group.
Currently, HDFC owns nearly 48 per cent in HDFC Life Insurance. RBI has been mulling capping a bank’s ownership in an insurance firm at 20 per cent. Application has also been recently moved before the National Company Law Tribunal for the approval of the scheme of amalgamation between HDFC and HDFC Bank.