This is a merger of equals: HDFC chief Deepak Parekh

In the biggest merger in corporate history, India's largest housing finance company HDFC Ltd will merge with country's largest private lender HDFC Bank to create a banking behemoth.

The scheme of amalgamation will be subject to various regulatory approvals, including from the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi), HDFC Bank said in the filing on Monday.

Once the deal is effective, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC will own 41 per cent of the bank, according to stock exchange filings by the firms.

Every HDFC shareholder will get 42 shares of HDFC Bank for 25 shares held.

"This is a merger of equals," said Deepak Parekh, Chairman, HDFC Ltd.

"We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, infrastructure status to the housing sector, government initiatives like affordable housing for all, amongst others."

HDFC vice-chairman and CEO Keki Mistry. "This merger will make HDFC Bank a large lender even by global standards.

“It will make more room for FII holding in HDFC Bank."

The HDFC-HDFC Bank merger is expected to be completed by the second or third quarter of FY24.

HDFC said the Proposed Transaction shall enable HDFC Bank to build its housing loan portfolio and enhance its existing customer base.

The merger is subject to regulatory approvals from the RBI and other regulatory authorities.

As on date, HDFC has total assets of Rs 6.23 lakh crore, while HDFC Bank has assets worth Rs 19.38 lakh crore.

HDFC Bank has a large customer base of 6.8 crore and a well-diversified low cost funding base for growing the long-tenor loan book.

"A combination of the Corporation and HDFC Bank is entirely complementary to, and enhances the value proposition of HDFC Bank," HDFC said.

"HDFC Bank would benefit from a larger balance sheet and networth, which would allow underwriting of larger ticket loans and also enable a greater flow of credit into the Indian economy."

HDFC Bank will enable seamless delivery of home loans and leverage on the large base of over 6.8 crore customers of HDFC Bank and improve the pace of credit growth in the economy.

"The proposed transaction is to create a large balance sheet and net-worth that would allow greater flow of credit into the economy," it said.

"It will also enable underwriting of larger ticket loans, including infrastructure loans -- an urgent need of the country."

While HDFC Ltd is a significant provider of home loans to the low and middle income group segment under the affordable housing initiatives of the government of India, HDFC Bank has a presence in more than 3,000 cities/towns through its 6,342 branches.

Leveraging this distribution might, the proposed merger would broaden the home loan offering.

With this merger HDFC bank gets an unparalleled advantage through the mortgage portfolio providing it a quantum leap in distribution to semi urban and rural areas with a huge opportunity to cross sell bank products to a very very sticky client base.

The combined entity will be able to extract substantial synergy benefits.