July 19, 2024

Housing Finance Development

It's Your Housing Finance Development

HDFC says effective date of July 1 for merger with HDFC Bank is ‘ tentative’

Housing Development Finance Corporation Ltd on Tuesday clarified that the effective dates of July 1 for its merger with HDFC Bank Ltd and July 13 as record date are ‘tentative’.

Earlier on Tuesday, HDFC Chairman Deepak Parekh announced the dates at a press conference in Mumbai.

“We refer to some news reports of today referring to press interaction of the Chairman of HDFC Limited wherein inter alia the tentative Effective Date of the Scheme as July 1, 2023, and the tentative ‘Record Date’ for determining the shareholders of HDFC Limited who would be allotted equity shares of HDFC Bank as per the Share Exchange Ratio, as July 13, 2023, were given. In this regard, we wish to clarify that both, HDFC Limited and HDFC Bank are working towards completing all the necessary formalities for completion of the Proposed Amalgamation as per the aforesaid tentative dates,” said HDFC in a stock exchange filing.

The housing finance firm said the dates are “beyond the control” of HDFC Ltd or HDFC Bank.

“Please note that the above dates are tentative and are subject to completion of certain formalities including those which are beyond the control of HDFC Limited or HDFC Bank. Once the board of directors of HDFC Limited and HDFC Bank decide on the Effective Date of the Scheme as well as the Record Date, the same would be intimated to stock exchanges in accordance with applicable regulations,” said HDFC.

”Almost all the approvals are in place, and we hope to complete the merger process effective July 1. The boards of HDFC and the bank are meeting separately on June 30 after office hours to clear and approve the merger, which will be effective July 1,” Parekh, flanked by his deputy Keki Mistry, told reporters.

Parekh was talking to reporters after dedicating the HT Parekh Legacy Centre (Deepak Parekh’s uncle who founded the country’s first home finance company in 1978 after he retired from ICICI Ltd in 1977) at the Ramon House, the headquarters of the housing finance major, which handles over Rs 6 lakh crore of home loans in its book.

HDFC vice-chairman and chief executive Keki Mistry said after the all-stock merger, the shares of HDFC will cease to be traded from July 13 or 14.

”Effective July 13 or 14 or latest by July 17 for sure, HDFC shares will be trading as HDFC Bank shares. Frankly speaking, I can’t tell you an exact date for this as this process is up to the exchanges to decide and execute,” Mistry explained. Termed as the biggest transaction in the history of India Inc, HDFC Bank on April 4, 2022, agreed to take over its parent, which is the largest pure-play mortgage lender, in a USD 40-billion all-stock deal, creating a financial services titan with a combined asset of over Rs 18 lakh crore.

The combined shares of the HDFC twins will have the highest weighting on the indices at close to 14 per cent, much higher than the present index heavyweight Reliance Industries with a 10.4 per cent weightage.

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. Every HDFC shareholder will get 42 shares of HDFC Bank for every 25 shares they hold. Mistry, whose appointment to the board of the bank as an independent director is awaiting the Reserve Bank approval, said the merged entity has larger scope for mortgage loans as of the 70 million plus customers of the bank, only 2 per cent have taken home loan from the corporation, and another 5 per cent from other lenders. This shows the tremendous opportunities for growth.

Also, we get on average 75,000 loan applications, now think how much this number can go with the combined might of the bank, Parekh added. Regarding the advantages of the merger, Parekh and Mistry said the biggest plus point is that there is no commonality between the bank and the Corporation when it comes to the business. The bank is not into mortgages. It is the biggest advantage of the merger as, when there are common products, it whittles away the merger benefits. Another advantage is the common culture running through both the entities, they said and Parekh, who joined the bank at the insistence of his uncle HT Parekh leaving his plus job with Chase Manhattan in Dubai, from day one of the Corporation’s operations, said he expects the bank to continue to live through the founder’s values.

Parekh said June 30 will be his last working day after spending 46 years at the Corporation and when asked what he will do after the board meeting, he jokingly quipped ”I will have a few drinks”.

On people integration, Mistry said all those under 60 years will move to the bank immediately because the RBI does not allow those above 60 to work in a bank.

”All our 4,000 employees minus those few who pushing 60 will be moving to the bank immediately on the merger and will continue to do mortgage lending or till they are retrained to do normal banking,” Mistry said, adding only a minuscule of these 4,000 employees are retiring or have chosen to hang up their boots after the merger.

On the Credila sale, Parekh said we chose to sell them as that was one of the conditions that the regulator put forward for merger approval and the advantage of the sale is that the company can continue to on-board students in this busy academic season.

Another option was to stop fresh lending till the sale, he said, and expects the sale process to be completed over the next two-four weeks as by then they expect the CCI nod to be in. He said the entire sale proceeds of Rs 9,060 crore will go to the bank, and so will all the buildings that the Corporation owns, including the Ramon House, where the HT Parekh Legacy Centre is housed and also the HDFC House and the nearby HUL House which the company had bought over last decade.

On June 20, HDFC said it has sold 90 per cent of its stake in the education loan arm HDFC Credila to a consortium of private equity firms, including BPEA EQT and ChrysCapital. The sale took place after the RBI had in April asked HDFC to reduce its stake in Credila to under 10 per cent over the next two years.

The total revenue of HDFC Credila in fiscal 2023 was Rs 1,352.18 crore and its net worth was Rs 2,435.09 crore.

The PE consortium also includes Kopvoorn, Moss Investments, Defati Investments Holding and Infinity Partners. While Kopvoorn is part of the BPEA EQT Group and Moss Investments, Defati Investments Holding and Infinity Partners are part of the ChrysCapital group. On the three schools that HDFC runs in Pune, Bangalore and Gurgram, Parekh said, under the merger approval, the RBI has given us two years to exit the schools.

So till disposed of, they will be under the bank from July 1, he added.

(With inputs from PTI)