HDFC Limited Board on Monday approved merger of the country's largest mortgage lender HDFC Limited with the country's largest private lender HDFC Bank. As per the merger details after the deal get requisite approvals from the sharesholder, Sebi, Reserve Bank of India, Competition Commission of India, National Housing Bank, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority and National Company Law Tribunal, the subsidiaries of HDFC will become subsidiaries and associates of HDFC Bank. Shareholders of HDFC Limited as on the record date will receive 42 shares of HDFC Bank and equity shares of HDFC will extinguish.
AK Prabhakar, Head of Research, IDBI Capital
State Bank of India, the country's largest lender, has 26 lakh crore loan portfolio out of which only Rs 6 lakh crore is housing loan portfolio while HDFC on a standalone basis as a housing loans worth Rs 5.25 lakh crore and the merger is a win-win proposition for both the entities. The proposed entity will be the second largest entity with a loan portfolio of Rs 18 lakh crore. Now the HDFC employees will be able to sell HDFC Bank products and it will reduce cost of funds for them.
Santosh Meena, Head of Research, Swastika Investmart
The proposed merger will enable HDFC Bank to build its housing loan portfolio. The housing loan market is at the cusp of a strong up-cycle along with tailwinds for the real estate sector, and it provides a steady secured asset class with very attractive risk-adjusted returns. This will increase the balance sheet size of the merged entity enabling it to underwrite large ticket size loans. Overall this is a marriage made in heaven, creating increased scale, comprehensive product offering, balance sheet resiliency and the ability to drive synergies across revenue opportunities, operating efficiencies and underwriting efficiencies, hence benefiting stakeholders of both the companies.
Ravi Singhal, Vice Chairman, GCL Securities Limited
The merger will prove out to be beneficial for both as HDFC Ltd will come out from a holding company discount whereas the HDFC Bank will now add more home loans to its portfolio.
Ravi Singh, Vice President and Head of Research, Share India
HDFC Bank reported loan growth of 21 per cent annually and retail deposit growth is also healthy. The operating profits may also see a surge on strong commercial banking and corporate segment. The merger of HDFC Bank and HDFC is a complement to the investors and a value addition to HDFC Bank.
Manoj Dalmia, Founder and Director, Proficient Equities
This merger will help expand the customer base and build a product portfolio in the housing loan category. We expect a great future ahead for this giant and this merger might be game-changer in their segment. Recommend to buy this stock and accumulate it on dips.