HDFC Bank to merge with HDFC Ltd, shares rally 10%

New DelhiL India`s largest private lender HDFC Bank will merge with HDFC Ltd, the country`s largest housing finance company to create a financial services conglomerate.

"The resulting larger balance sheet would allow underwriting of large ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector...," HDFC Ltd Chairman Deepak Parekh said.

As part of the deal, shareholders of HDFC Ltd will receive 42 shares of the bank for 25 shares held. Existing shareholders of HDFC Ltd will own 41% of HDFC Bank.

Shares held by the housing finance company in the lender will be extinguished, making HDFC Bank a full-fledged public company.

Deepak Parekh, Chairman HDFC Limited, said, “This is a merger of equals. We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, infrastructure status to the housing sector, government initiatives like affordable housing for all, amongst others. Over the last few years, various regulations for banks and NBFCs have been harmonised, thereby enabling the potential merger. Further, the resulting larger balance sheet would allow underwriting of large ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector, including credit to the agriculture sector.”

The Indian equities markets benchmark Sensex surged 1202.71 points on Monday led by the merger announcement between HDFC Limited and HDFC Bank. The 30 Stock S&P BSE Sensex surged 1202.71 points or 2.03 per cent to 60,479.40 points at 10 am. The broader Nifty 50 of the National Stock Exchange rose 354.65 points or 2.01 per cent to 18,025.10 points.

Meanwhile, shares of HDFC and HDFC rallied 13.57 per cent to Rs 2783.60 at 10 am, while HDFC Bank traded 9.74 per cent higher at Rs 1654.20.