Private lender HDFC Bank said it has received no adverse observations from the stock exchanges in relation to its proposed merger with parent entity Housing Development Finance Corporation (HDFC) Ltd.
“We would like to inform you that HDFC Bank has received observation letter with ‘no adverse observations’ from BSE Limited and observation letter with ‘no objection’ from the National Stock Exchange of India Limited, both dated July 2, 2022,” it said in a regulatory filing.
The merger was announced in April this year when HDFC’s board had cleared the amalgamation of its wholly-owned subsidiaries HDFC Investments Ltd and HDFC Holdings Ltd with HDFC Bank.
While the proposed merger has received a thumbs-up from the stock exchanges, it still requires approvals from other regulatory bodies.
“The scheme remains subject to various statutory and regulatory approvals inter alia including approvals from the Reserve Bank of India, the Competition Commission of India, the National Company Law Tribunal and the respective shareholders and creditors of the companies involved in the scheme, as may be required,” HDFC Bank said.
As per the plan, HDFC will acquire a 41 percent stake in HDFC Bank through the transformational merger. Every 25 shares held by HDFC shareholders will fetch them 42 shares of the bank. The merger created an entity that will have a market cap of Rs 12.8 lakh crore and a balance sheet of Rs 17.9 lakh crore.
HDFC Chairman Deepak Parekh, while announcing the plan, had called it a “merger of equals” and attributed tight RBI regulations on non-banking finance companies (NBFCs) as a major reason for the merger.
In an exclusive conversation with Moneycontrol after the announcement, Parekh, the veteran banker who built the iconic mortgage lender over four decades, had said that it makes sense for the mortgage lender to merge with the bank considering the absence of any regulatory arbitrage for non-banks due to RBI tightening of rules.
Parekh elaborated on how the tight RBI regulations have impacted the NBFC industry. He cited rules on NPA (non-performing assets) and liquidity coverage ratio as examples. Also, the cost of money for NBFCs is on the rise, he said.
HDFC and HDFC Bank merger has been in the news for a while. In fact, back in 2015, Parekh had said his firm could consider a merger with HDFC Bank provided circumstances were in favour.
With the parent finally giving the go-ahead for the merger, the resultant entity is expected to emerge as a powerhouse in the Indian banking industry.