HDFC-HDFC Bank Merger: Biggest Transaction In India’s Corporate History; How It Will Affect Stock Market | Explained
HDFC Bank has officially received the final approval from its board of directors for the merger with its parent company, Housing Development Finance Corporation (HDFC). This historic merger, valued at $40 billion, is set to create a financial services giant in India with a combined asset base of over Rs 18 lakh crore.
The merger, which is slated to take effect on July 1, 2023, has been hailed as the largest transaction deal in the history of corporate India. It will have far-reaching implications for the stock market, impacting millions of customers, shareholders, and businesses associated with both companies. The proposed combined entity will have an asset base of approximately Rs 18 lakh crore.
From a stock market perspective, the trading window for HDFC Ltd will be closed from Monday next week until the HDFC Bank HDFC merger record date, which is set for July 13, 2023. This means that employees, designated employees, directors, and their immediate relatives will not be able to trade in HDFC Ltd securities during this period, in adherence to SEBI (Prohibition of Insider Trading) Regulations, 2015.
The merger will result in a significant change in HDFC Bank’s market capitalization, which is expected to be around Rs 14,73,953 crore. This will make HDFC Bank the second most valuable Indian company in terms of market capitalization, after Reliance Industries. HDFC Bank’s market capitalization is estimated to be around Rs 17,25,704.60 crore, surpassing the previous leader, Tata Consultancy Services.
Furthermore, the Nifty weightage of HDFC Bank will increase to approximately 15 percent, whereas HDFC’s contribution will be around 6.16 percent. Together, they will contribute 15.39 percent, making Reliance no longer the dominant stock on Nifty. This represents a significant shift in the stock market landscape.
The merger will also position HDFC Bank as the fourth largest bank in the world, following JP Morgan Chase & Co, Industrial and Commercial Bank of China Ltd (ICBC), and Bank of America Corp. This consolidation of resources and expertise will undoubtedly strengthen HDFC Bank’s position in the global banking sector.
It’s worth noting that the merger will result in HDFC Bank being fully owned by public shareholders, including existing shareholders of HDFC Ltd. These shareholders currently hold approximately 41 percent of HDFC Bank. As per the filings, every HDFC shareholder will receive 42 shares of HDFC Bank for every 25 shares they hold, ensuring that they benefit from this significant transaction.
In conclusion, the HDFC-HDFC Bank merger marks a momentous event in India’s corporate history. It is set to reshape the stock market landscape, propel HDFC Bank to new heights, and create a financial services titan with a combined asset base of over Rs 18 lakh crore. Investors, customers, and stakeholders can look forward to the exciting opportunities that this merger will bring.
