India’s HDFC Bank will soon rank among the world’s most valuable banks after completing a landmark merger.
The tieup of HDFC Bank Ltd. and Housing Development Finance Corp. will make the resulting entity fourth biggest in terms of equity market capitalisation, just behind JPMorgan Chae & Co., Industrial and Commercial Bank of China Ltd. and Bank of America Corp.
The tieup is valued at about $172 billion, Bloomberg reported.
How big will be the new HDFC Bank entity?
The new entity will have nearly 120 million customers, more than the population of Germany. The branch network will increase to over 8,300 along with a collective headcount of over 177,000 employees.
In terms of market capitalisation, the bank will leave behind its Indian competitors State Bank of India and ICICI Bank with market capitalisations of about $62 billion and $72 billion respectively, Bloomberg report added while citing data up to June 22.
HDFC-HDFC Bank merger
The merger of housing finance major HDFC with HDFC Bank, the country’s biggest private lender, will come into effect on July 1, according to HDFC Chairman Deepak Parekh. The merger will reportedly mark the biggest transaction in India’s corporate history.
The merger deal of HDFC Bank and HDFC was announced on April 4 last year.
The transaction was proposed to “create a large balance sheet and net worth that would allow greater flow of credit into the economy”, according to the lender.
Also watch | World Business Watch: HDFC Bank’s net profit jumps by 18.5%
The bank had said that the merger will also enable it to underwrite larger ticket loans, including infrastructure loans.
HDFC Limited offers home loans to the Low Income Group (LIG) and Middle Income Group (MIG) segments under the affordable housing initiatives of the government. “Access to housing finance for this category would be improved further on account of low-cost funds available with HDFC Bank,” the bank said.
After the merger deal, HDFC Bank will be entirely owned by public shareholders. The existing shareholders of HDFC will own 41 per cent of the lender.
Under the 25:42 swap ratio, every shareholder of HDFC will receive 42 shares of HDFC Bank for every 25 shares they own.
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