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HDFC-led Gruh Finance is set to merge with private sector lender Bandhan Bank. The board of directors of the housing finance company and the private bank, on Monday, individually approved the merger, which is subject to regulatory and shareholder approvals.
It will be effective January 1, 2019, and could be completed over the next six months, if not sooner, if all approvals come through.
According to the share-exchange ratio agreed by the boards, 568 equity shares of face value ₹10 each of Bandhan Bank will be issued for every 1,000 equity shares of face value ₹2 each of Gruh.
The move follows the Reserve Bank of India imposing penalties, including a freeze on the remuneration of Bandhan Bank’s Managing Director and CEO Chandrasekhar Ghosh, as well as on branch expansion, as it had failed to dilute promoter shareholding to the mandated level of 40 per cent. Post merger, the shareholding of Bandhan Financial Holdings in Bandhan Bank would reduce to 61 per cent from 82.3 per cent. “Promoter holding has come down by a big amount. We will see how to lower it further in the future,” said Ghosh.
Terming the proposed merger akin to a marriage, with Gruh as the bride, Deepak Parekh, Chairman, HDFC, said it will create one of the largest rural and semi-urban lending platforms in India.
HDFC holds 57.83 per cent stake in Gruh Finance, which will come down to about 15 per cent after the merger. HDFC hopes the RBI will accept its financial investment post merger, as it also holds stake in HDFC Bank. “We hope the RBI will consider our request. Else, we will have to consider bringing down our stake to 9.9 per cent,” said Parekh, adding that HDFC also held 4.5 per cent stake in RBL Bank when it was set up.
Keki Mistry, Non-Executive Chairman, Gruh, called it the largest merger ever in India of two unaffiliated entities.
Post merger, the combined entity would have a market cap of close to ₹84,000 crore.
Similarly, post merger, based on proforma financials as of September 30, 2018, Bandhan Bank would have an outstanding loan book AUM of ₹50,036 crore, a combined distribution network of 4,182 banking outlets, and 476 ATMs across 34 States and Union Territories. The merged entity would have 1.5 crore customers.
Shares of Bandhan Bank fell 5.21 per cent and closed at ₹501.10 apiece on the BSE. Gruh Finance shares also fell 3.86 per cent and closed at Rs 306.20 apiece on the BSE.
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