HDFC-HDFC Bank Merger Approved, Board Considering Raising Funds Through NCDs

NCLT approves merger of HDFC and HDFC Bank.

India’s largest mortgage lender, Housing Development Finance Corp (HDFC), plans to raise funds through non-convertible debentures (NCDs) to meet its capital requirements post-merger with HDFC Bank.

The company’s board will consider issuing unsecured redeemable non-convertible debentures in tranches aggregating to Rs 57,000 crore at a meeting on March 27, 2023. HDFC received approval for this from shareholders at its 45th Annual General Meeting on June 30, 2022.

HDFC sold 10-year bonds at a coupon of 7.97% to meet its capital requirements, with most of the funds expected to be used after the merger. It was India’s top seller of rupee bonds last year and has now raised an aggregate of Rs 784.14 billion through bond issuance in this financial year, the highest by any company.

The proposed merger between HDFC Bank and HDFC received a green flag from the National Company Law Tribunal (NCLT) and the stock exchanges. Upon completion, the public will entirely own HDFC Bank, while existing HDFC shareholders will hold a 41% stake. The merger is anticipated to be finalised in the second or third quarter of FY24.

HDFC Ltd has received approval letters from the Reserve Bank of India, Securities and Exchange Board of India (Sebi), PFRDA and Competition Commission of India (CCI), and Indian stock exchanges BSE and NSE.

According to Keki Mistry, HDFC Vice Chairman and CEO, the merger will lead to bigger growth opportunities for the combined entity. The motive behind the merger is to expand housing loans from more and more branches of the bank, said Mistry. He is opportunistic om the growth potential of the combined entity.

In a deal worth approximately $40 billion, HDFC Bank has agreed to acquire HDFC, forming a financial services behemoth. Under the merger terms, each HDFC shareholder will receive 42 shares of HDFC Bank for every 25 shares they hold. This merger is one of the largest in India’s corporate history. It is expected to create the country’s third-largest company, with a combined asset base of approximately Rs 18 lakh crore.

Meanwhile, shares of HDFC Ltd and HDFC Bank were up more than 1.7% at Rs 2,575.95 and Rs 1,578.20, respectively, on the BSE late today.

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