Following the merger announcement, shares of Housing Development Finance Corp (HDFC) and HDFC Bank shares — widely known as the HDFC twins – skyrocketed as much as 16 percent on the BSE on Monday.
Index heavyweights – HDFC and HDFC Bank – saw their shares soaring over 16 percent and 14 percent, respectively in intraday trade. Later, they were settled with 9.15 percent and 9.81 percent gains on the BSE, respectively.
The proposed merger, subject to shareholder and regulatory nods, will create one of the biggest banks in the world.
On the NSE, HDFC shares closed 9.12 percent higher at 2,676 a unit and HDFC Bank scrips ended 9.83 percent up at 1,654.10 apiece.
Both stocks were the biggest contributors to the surge in the Sensex and Nifty50.
Under the scheme of amalgamation, shareholders will get 42 shares in HDFC Bank for every 25 shares held in HDFC.
HDFC currently holds around 21 percent in HDFC Bank.
The merger will turn the companies into a full-stack financial services conglomerate, which will be a “win-win for all stakeholders”, HDFC Bank said in a regulatory filing.
India’s largest private sector bank by assets and world’s 10th largest bank by market capitalisation as of April 2021, HDFC Bank, will emerge as a large lender, even by global standards, after the merger. HDFC Vice-Chairman and CEO Keki Mistry opined that the amalgamation will make more room for FII holding in HDFC Bank.
“HDFC Bank will be 100 percent owned by shareholders. NBFCs now need to move towards core banking solutions platforms, like banks. HDFC and HDFC Bank to continue to operate independently, till the merger date. Cross-selling of banking products will be possible to HDFC Customers,” he explained.
The long-speculated merger makes sense since the norms for NBFCs, housing finance companies and banks are almost the same now. Earlier, NBFCs and especially housing finance companies enjoyed an arbitrage advantage, which has gone now.
Mythili Bhusnurmath, Consulting Editor, ET NOW, said, “The housing finance companies have come under RBI supervision. So, norms are almost the same for NBFCs, housing finance companies and banks. Regulatory arbitrage and cost advantage has gone.”
