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HDFC Bank Rises 10% on Merger with HDFC and Strong March Quarter

08 August 20225 mins read by Angel One
HDFC Bank Rises 10% on Merger with HDFC and Strong March Quarter
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HDFC Bank’s stock gained 10% in early trading on April 4 on the news of a merger with Housing Development Finance Corporation (HDFC) and higher quarterly and annual results. HDFC has authorized a plan to combine HDFC with HDFC Bank and merge wholly-owned subsidiaries HDFC Investments and HDFC Holdings into HDFC.

According to HDFC, the programme is subject to the necessary clearances. It further said that the share exchange ratio for the merger of HDFC and HDFC Bank will be 42 HDFC Bank shares for every 25 fully paid up HDFC equity shares. As of March 31, 2022, the bank’s advances were about Rs 13,69,000 crore, up 20.9 percent year over year and 8.6 percent quarter over quarter, according to a press statement from HDFC Bank.

As of March 31, 2022, the deposits were over Rs 15,59,000 crore, up 16.8% from the previous quarter and around 7.8% from the previous year. Retail deposits increased by 18.5 percent on March 31, 2021, and by about 6% on December 31, 2021, while wholesale deposits increased by roughly 10% on March 31, 2021, and by around 17% on December 31, 2021.

The bank says it added 563 locations during the quarter under review, raising its total branch network to 6,342. As of March 31, 2022, the bank’s CASA deposits were over Rs 7,51,000 crore, up around 22% from a year earlier and 10.2 percent from a quarter ago.

According to the bank, the CASA ratio was about 48 percent as of March 31, 2022, compared to 46.1 percent a year ago and 47.1 percent a quarter ago. HDFC Bank was trading at Rs 1,599.20 on the BSE at 09:19 hours, up to Rs 92.90 or 6.17 percent, while HDFC was trading at Rs 2,647.45, up to Rs 196.50 or 8.02 percent.

What is the consequence of HDFC Limited and HDFC Bank merging

On Monday, HDFC Bank and HDFC Ltd declared their intention to combine, paving the way for one of India’s largest financial transactions. The news of the merger resulted in a substantial increase in the two companies’ share values, which were up over 7% in early trading hours. The acquisition is likely to finalize in the next 18 months, subject to regulatory clearances and other normal closing conditions, according to HDFC Bank.

What is the merger strategy?

HDFC Limited, India’s largest housing finance company with Rs 5.26 trillion in assets under management (AUM) and a market capitalization of Rs 4.44 trillion, will merge with HDFC Bank, India’s largest private sector bank by assets with a market capitalization of Rs 8.35 trillion, according to the transaction structure. HDFC Limited’s subsidiaries and partners will likewise be transferred to HDFC Bank.

What is the transaction’s share swap ratio?

HDFC Limited shareholders would get 42 HDFC Bank shares for every 25 HDFC Limited shares they own as of the record date.

What will happen to the ownership?

HDFC Limited’s ownership in HDFC Bank will be terminated after the merger, and HDFC Bank would be 100% held by public shareholders. HDFC Limited’s existing shareholders will own 41% of HDFC Bank.

What are the advantages and disadvantages of the merger for the two companies?

While the move will help them utilize their distribution across urban, semi-urban, and rural regions, it will also boost their capacity to cross-sell items to a bigger consumer base. The combined financial sheet of Rs 17.87 trillion and net value of Rs 3.3 trillion would allow for higher-scale underwriting.

Wrapping Up

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Frequently Asked Questions (FAQs)

Q1. Is it possible to have a zero balance at HDFC Bank?

Some HDFC Bank Savings Account types also provide benefits such as unrestricted cash withdrawals at ATMs and no minimum balance requirement, which adds to the attraction of a Savings Account.

Q2. What is the HDFC IMPS limit?

The maximum amount that may be transferred per transaction, according to the NPCI circular, is Rs 2 lakhs. Any transaction that exceeds Rs 2 lakhs will be rejected and paid back to your account. IMPS transfers can only be made between banks that are participants in the IMPS transaction.

Q3. What happens if the HDFC Bank’s minimum balance is not met?

If you do not maintain the required amount on your savings account in a metro city, HDFC Bank may charge you as much as 600 rupees. The total price is more than Rs 600, including service tax and another cess. In the case of HDFC Bank, the minimum balance limit is Rs 10,000 for urban branches and Rs 5,000 for semi-urban branches.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.

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