HDFC-HDFC reverse merger to complete on July 1: Deepak Parekh

MUMBAI: The reverse merger of the housing finance major HDFC with its banking subsidiary HDFC Bank will be effective July 1, Corporation chairman Deepak Parekh said on Tuesday.

“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 $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.

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.